Rev. Rul. 72-271

A United States bank executed, sold, and delivered to a United States person American Depositary Receipts (ADRs) certifying that he is the owner of a specified number of American Depositary Shares representing the number of common stock shares of a foreign corporation that he purchased. Such shares are deposited by the foreign corporation in a foreign bank that has been appointed the agent of the United States bank. The primary purpose of the stock deposit arrangement is to overcome the mechanical and other problems involved in the purchase, holding, or sale by nonresidents of the foreign country of the underlying securities of the foreign corporation by making available to United States investors readily transferable American-style certificates evidencing the rights to the underlying shares.

Held, the receipt of the American Depositary Receipts is an acquisition as defined by section 4912(a) of the Internal Revenue Code of 1954 of an interest in stock within the meaning of section 4920(a)(2) of the Code, and thus, is subject to the interest equalization tax as imposed by section 4911 of the Code where the purchase of such foreign common stock and the resulting receipt of the ADRs are not otherwise exempted or excluded from the interest equalization tax under the Internal Revenue Code. Compare Revenue Ruling 65-218, C.B. 1965-2, 566 which states that a holder of an ADR will be treated for purposes of the foreign tax credit allowed by section 901 of the Code and for purposes of the benefits provided by the United States-Japan Income Tax Convention, as if he held the underlying corporation's stock directly.