Rev. Rul. 71-339

The taxpayer is a United States person residing in a foreign country. Due to his qualifications and varied experience, the taxpayer was nominated as director for the board of directors of a foreign corporation actively engaged in business in such country. After being appointed by the foreign corporation to assume the directorship, the taxpayer acquired the minimum number of shares of stock of the foreign corporation to meet the stock ownership requirements under the laws of the foreign country and the by-laws of such corporation.

Held, the activities of the taxpayer as director of the foreign corporation constitute "doing business" within the meaning of section 4914(b)(3) of the Internal Revenue Code of 1954, and by virtue of such section, stock of the foreign corporation which he acquired to meet the stock ownership requirements under the laws of the foreign country is not subject to the interest equalization tax. However, section 4914(b)(3) of the Code does not apply to any additional shares of stock he may acquire in the foreign corporation including stock required to be acquired under the by-laws of such corporation in excess of the minimum amount of stock required to be acquired under the laws of the foreign country.