Rev. Rul. 70-418

During the taxable year a taxpayer, domiciled in a noncommunity property state, acquired 20x shares of common stock (amounting to less than one percent of the outstanding stock) in a foreign corporation. Previously, the taxpayer's husband had purchased 400x shares of common stock of such foreign corporation and, since this acquisition, has continuously owned over ten percent of the voting power of all outstanding shares of common stock of the foreign corporation which was the only class of stock it was authorized to issue. Section 4915(a)(1) of the Internal Revenue Code of 1954 provides, in part, that the interest equalization tax does not apply to the acquisition by a United States person of stock or a debt obligation of a foreign corporation if immediately after the acquisition such person (or one or more includible corporations in an affiliated group, as defined in section 1504 of the Code, of which such person is a member) owns (directly or indirectly) ten percent or more of the total combined voting power of all classes of stock of such corporation, or of stock or a debt obligation of a foreign partnership if immediately after the acquisition such person owns (directly or indirectly) ten percent or more of the profits interest in such foreign partnership.

Section 4915(a)(1) of the Code also sets forth an attribution of stock ownership from a foreign corporation to its shareholders and from a foreign partnership to its partners, but it does not provide for attribution of stock ownership from one member of a family to another or more specifically, from one spouse to another.

Held, the taxpayer is not considered to constructively own stock in the foreign corporation which is actually owned by her husband. Accordingly, her acquisition of 20x shares in such foreign corporation, being less than ten percent of the voting stock, does not qualify for exemption from interest equalization tax under section 4915(a)(1) of the Code.