thereof are constitutionally free from taxation by the Federal Government, that bonds given by officials of a state, township, county or village for the faithful performance of duties, were not taxable.12 Bonds given to a State for the performance of contracts, such as the construction of state or municipal buildings, or the discharge of other duties strictly for or in behalf of the State, when necessary to protect the State's interests, were held not subject to taxation.12a A bond given as a condition to the granting of a license by a State or political subdivision is not taxable if the license is issued in the exercise of the governmental powers of the State or political subdivision.13

BONDS GIVEN BY STATES AND POLITICAL SUBDIVISIONS. All bonds given by states, townships, counties and subdivisions thereof are exempt from taxation.14

BONDS GIVEN TO THE FEDERAL GOVERNMENT. Bonds given to the Federal Government are taxable.15

BONDS ISSUED IN FOREIGN COUNTRIES. It was held under the former law that bonds issued by guaranty companies in foreign countries guaranteeing the fidelity of individuals or corporations in the United States, executed and delivered in the foreign country, were not taxable, but if they were not valid until countersigned or delivered by the agent in the United States, they should be taxed.16

BONDS DELIVERED PRIOR TO INCIDENCE OF TAX. Under the

12 T. D. 2111.

12a T. D. 2072.

13 Ambrosini v. U. S., 187 U. S. 1, 23 Sup. Ct. 1, 47 L. Ed. 49.

14 T. D. 2072.

15 T. D. 2111. 16 T. D. 2051.

former law it was held that any bond executed and delivered prior to the date on which the tax was first imposed, whether or not taking effect immediately or subsequent to the enforcement of the taxing act, were not subject to the tax.17

Building and Loan Associations. Stocks and bonds issued by co-operative building and loan associations which are organized and operated exclusively for the benefit of their members and make loans only to their shareholders, are not subject to the tax.18 This provision of the law seems to exempt stock of such associations from the tax on original issue and also from the tax on sales or transfers.

Capital Stock, Issue. Although the heading of this paragraph is that used in the statute, the language of the law is that the tax shall be imposed "on each original issue, whether on organization or reorganization, of certificates of stock by any association, company or corporation." The rate is five cents on each one hundred dollars of face value or fraction thereof, unless the capital stock is issued without face value, in which case the tax is five cents per share, unless the actual value of the share is in excess of one hundred dollars in which case the tax is five cents on each one hundred dollars of actual value or fraction thereof.19 The tax is determined by the face value of the certificate.

CONTRACT TO ISSUE STOCK. No stamps are required to

17 T. D. 2072.

18 Act of October 3, 1917, Section 801. Under the former law it was held that notes given to or by such asociations were taxable. (T. D. 2112.)

19 The Act of October 22, 1914, was silent as to shares without par value and it was held under that law that such shares were not subject to tax.

be affixed to a contract or agreement by a corporation to issue stock.20 It seems that the tax is on the certificates of stock issued to the shareholders not on the issue of the shares.

ORIGINAL ISSUE OF CERTIFICATES., Under the former law it was held that stock certificates issued in lieu of original certificates in a case where a corporation had changed its name were not taxable as an original issue. Temporary or interim stock certificates issued before the permanent certificates are taxable as original issue; the subequent exchange of such temporary certificates for the regular stock certificates to the same owner is not subject to any tax.21 It was held under the former law that where bonds had been issued with the privilege of exchanging the same for certificates of stock, and the option was exercised after the incidence of the tax, the stock certificates then issued were taxable as an original issue, unless prior to the incidence of the tax the stock certificates in question had been issued and were held in trust for the purchaser of the bonds, in which case the rate of tax on transfers of stock was applicable.22

STOCK OF FOREIGN CORPORATIONS. Under the former law it was held that certificates of stock sold or delivered within the United States were subject to the same tax as certificates of stock of domestic corporations and under the present law it has been held that stock of a corporation organized in a foreign country issued in the United States is subject to the tax on original issue.

WHERE TO AFFIX STAMPS. The stamps representing the tax imposed on the original issue of stock are required by law to be attached to the stock books and not to the

20 T. D. 2599. 21 T. D. 2584. 22 T. D. 2155.

certificates issued.23 Where the blank stock certificates are not kept in a stock certificate book the stamps should be affixed to the books of record in which the issue of stock is recorded.24

SHARES WITHOUT PAR VALUE. In the case of the issue of certificates of stock without par value it has been held that the value of the share for purpose of taxation will be determined by the statement of the company and the consideration involved in the issue of such stock.25

Capital Stock, Sales and Transfers. The law provides for a tax on (a) all sales, (b) agreements to sell or memoranda of sales or deliveries of or transfers of legal 26 title to shares or certificates of stock in any association, company, or corporation. The tax is imposed whether or not the sale or transfer is shown by the books of the association, company, or corporation, or is made by assignment in blank, or by any delivery, or by any paper or agreement or memorandum or other evidence of transfer or sale, whether entitling the holder in any manner to the benefit of such stock 27 or not. The rate of tax is two cents on each one hundred dollars of face value or fraction thereof unless the shares of stock are without par value, in which case the rate is 2 cents on each share unless the actual value thereof is in excess of $100 per share, in which case the tax is 2 cents on each

23 Act of October 3, 1917, Title 8, Schedule A, Subdivision 3. 24 Letter from Treasury Department dated November 20,

1917.

25 Letter from Treasury Department dated November 26, 1917.

22,

26 The word "legal" was not contained in the Act of October 1914.

27 The Act of October 22, 1914, also read: "or to secure the future payment of money or for the future transfer of any stock.",

$100 of actual value or fraction thereof. The tax is determined by the face value of the certificate of stock, or by the aggregate value of shares without par value represented by the certificate or involved in the sale or transfer. Certain exemptions are expressly made by the language of the law as shown in the following paragraphs.

DEPOSIT OF STOCK CERTIFICATES AS COLLATERAL SECURITY. No tax is intended to be imposed upon an agreement evidencing a deposit of stock certificates as collateral security for money loaned thereon, which certificates are not actually sold, nor upon such stock certificates so deposited. Under the former law it was held that no tax was imposed on stock deposited as collateral until complete title to the certificates of stock was acquired by the pledgee. This seems also to be the rule under the present law.

TRANSFERS TO OR BY A BROKER. No tax is imposed upon deliveries or transfers to a broker for sale, nor upon deliveries or transfers by a broker to a customer for whom and upon whose order he has purchased the same, but such deliveries or transfers shall be accompanied by a certificate setting forth the facts.28

CERTIFICATE BY BROKER. The following forms have been prescribed for the use of brokers: (a) (in the case of a transfer to a broker) "We hereby certify that we have no ownership, or interest, in *** shares of the stock above transferred, the transfer by the owner to us being merely for the purpose of sale," (b) (in the case of a transfer by a broker) "We hereby certify that the transfer of *** of the within shares to the names indicated by the star is made solely to complete the

28 Act of October 3, 1917, Section 807, Schedule A, Subdivision 4.