Rev. Rul. 73-561

The taxpayer, a United States person, entered into a bona fide lease agreement for Federal income tax purposes, on May 1, 1972, with a foreign corporation. The lease did not constitute a financing transaction for Federal income tax purposes.

Section 4911 of the Internal Revenue Code of 1954 imposes the interest equalization tax on each acquisition by a United States person of a debt obligation of a foreign obligor if such obligation has a period remaining to maturity of one year or more.

Section 4920(a)(1) of the Code provides, in part, that the term "debt obligation" includes obligations arising under a lease which is entered into principally as a financing transaction.

Section 147.7-10(b) of the Temporary Interest Equalization Tax Regulations provides tests for determining whether a lease is a financing lease under section 4920(a)(1) of the Code. However, the tests under these regulations apply only to leases executed on or after August 28, 1972, which were not executed pursuant to a binding written contract made before such date.

Held, since in the instant case, the lease was executed prior to August 28, 1972, and is a bona fide lease and did not constitute a financing transaction for Federal income tax purpses, it will not be treated as an obligation arising under a lease which is entered into principally as a financing transaction, under section 4920(a)(1) of the Code.