Situation (2). A company imports and sells wooden matches having plain stems but with colored tips, which are sold in boxes or books. Some of the boxes or books contain matches with tips of different colors. None of the colors involved would make any one match more ornamental or more attractive than an ordinary match. The question here is whether the packaging in one box of matches having tips of assorted colors is sufficient to bring the match within the term "fancy wooden matches." Section 4211 of the Internal Revenue Code of 1954 imposes upon the sale by the manufacturer, producer, or importer of matches, a tax of two cents per 1,000 matches but not more than ten per cent of the price for which so sold, except that in the case of fancy wooden matches and wooden matches having a stained, dyed, or colored stick or stem, packed in boxes or in bulk, the tax is five and one-half cents per 1,000 matches. Section 314.50 of Regulations 44, made applicable to the 1954 Code by Treasury Decision 6091, C. B. 1954-2, provides, in part, that the tax applies to all types of matches, regardless of whether sold in bulk, boxes, books, or in any other manner. Section 314.51 of the regulations provides that a fancy wooden match, within the meaning of the law, is one which has a wooden stem and which, in addition to serving the purpose of the ordinary match, is colored, or decorated, or manufactured in such a manner as to be more ornamental or more attractive than the ordinary match. With respect to the matches described in situation (1) above, the fact that the stems are stained is sufficient to bring them within the scope of the term "wooden matches having a stained, dyed, or colored stick or stem." That determination is not affected by the fact that the stems are stained merely to hide the natural discoloration of the wood. Furthermore, the applicability of the tax at the higher rate of five and one-half cents per 1,000 matches is not affected by the fact that the matches are sold in books rather than in boxes. With respect to determining whether the matches described in situation (2) above are "fancy wooden matches" the provisions of the regulations indicate that the taxable unit is the individual match, not the box or book of matches. The fact that matches with tips of various colors are contained in the same box would not make them "fancy wooden matches" by reason of that fact alone. On the basis of the rationale stated, it is held that the matches described in situation (1) above, are subject to the manufacturers excise tax at the rate of five and one-half cents per 1,000 matches. On the other hand, the matches described in situation (2) are subject to the tax at the rate of two cents per 1,000 matches. SECTION 4216.-DEFINITION OF PRICE Applicability of the manufacturers excise tax on phonograph records to specially-designed albums sold in connection with phonograph records. See Rev. Rul. 59-181, page 20. SECTION 4321.-IMPOSITION OF TAX [SALES OR TRANSFERS OF CAPITAL STOCK AND SIMILAR INTERESTS] 26 CFR 43.4321-2: Illustrations. Rev. Rul. 59-183 Applicability of the documentary stamp tax, imposed by section 4321 of the Internal Revenue Code of 1954, to the transfer of stock, which is community property, under the will of a California decedent who devised and bequeathed all of his estate to his wife for life, with remainder to his children. Advice has been requested concerning the applicability of the documentary stamp tax to the transfer of shares of stock under the circumstances described below. A resident of California, a community property state, died testate. By his will, the decedent devised and bequeathed all of his estate to his wife for life, with remainder over to his three children in equal shares. Included in the estate were 2,000 shares of stock which were registered in the names of the decedent and the surviving wife as joint tenants with right of survivorship. By court decree, it was held that the 2,000 shares of stock was community property. Therefore, the court, in its decree of distribution, decreed that one-half of all of the community property be set aside to the surviving wife of the decedent as her share of the community property and that the remaining one-half of the community property be distributed to the surviving wife for her life, and upon her death to the three children of the decedent in equal shares, share and share alike. Also, the court decreed that the surviving wife should have a certificate for her one-half of the stock and that a second certificate should be issued to her in her capacity as life tenant. Section 4321 of the Internal Revenue Code of 1954 imposes a tax on each sale or transfer of shares or certificates of stock, or of rights to subscribe for or to receive such shares or certificates, issued by a corporation. The title to real and personal property of a California decedent vests immediately upon the death of the decedent in the heirs or beneficiaries named in the will and does not first vest in the personal representative pursuant to the Probate Code of California. Therefore, there is an immediate passing of title to those entitled to receive the decedent's property. Moreover, in California, a husband and wife have undivided one-half interests in all of the community property. See Rev. Rul. 56-55, C. B. 1956-1, 682. Hence, in the instant case, when the decedent died, his undivided one-half interest in the community property vested immediately in his surviving wife as life tenant with remainder over to the decedent's three children. The undivided one-half interest of the wife in the community property was not distributed by the death of her husband. Therefore, after the death of the husband, the surviving wife owned a one-half undivided interest in the community property in her individual right and held the other one-half interest in her capacity as life tenant under the will of her deceased husband. Accordingly, it is held that liability for the documentary stamp tax is incurred as follows: 1. The passing of title to the surviving wife of the decedent's onehalf undivided interest in the community property upon the decedent's death is subject to the transfer tax imposed by section 4321 of the Code. Since this undivided interest is in respect to each of the 2,000 shares, the transfer tax is based on the entire number of shares involved (2,000). 2. The transfer of 1,000 shares from the undivided total number of shares (2,000) held by the surviving wife, individually, and as life tenant, into the name of the surviving wife as her sole and individual property is subject to the transfer tax. 3. Also, the transfer of 1,000 shares to the surviving wife as life tenant, under the decree of distribution, is subject to the transfer tax. ABBREVIATIONS The following abbreviations in current use and formerly used will appear in material published in the Bulletin. A, B, C, etc.-The names of individuals. C.F.R.-Code of Federal Regulations. E.T.-Estate and gift tax ruling. Em. T.-Employment tax ruling. F.A.A.A.-Federal Alcohol Administration Act. F.R.-Federal Register. G.C.M.-Chief Counsel's memorandum (formerly General Coun sel's memorandum). I.R.B.-Internal Revenue Bulletin. IR-Mim.-Published IR-Mimeograph. I.T.-Income tax ruling. M, N, X, Y, Z, etc.-The names of corporations, places or businesses, according to context. M.T.-Miscellaneous tax ruling. P.L.-Public Law. P.S.-Pension, profit-sharing, stock bonus or annuity plan ruling. Rev. Proc.-Revenue Procedure. Rev. Rul.-Revenue Ruling. R.S.-Revised Statute. S.M.-Solicitor's Memorandum. Sol. Op.-Solicitor's Opinion. S.P.R.-Statement of Procedural Rules. S.R.-Solicitor's Recommendation. S.S.T.-Social Security tax. S.T.-Sales tax ruling. Stat.-Statutes at Large. T.C.-The Tax Court of the United States. T.D.-Treasury Decision. TIR-Technical Information Release. U.S.C.-United States Code. and y used to represent certain numbers and when used with the word "dollars" represents sums of money. |