Untitled Texas Attorney General Opinion

T~~~EA~~~RNEY GENERAL OF TEXAS Honorable George~H. Shepperd~ Comptrollerof Publio Aooomts Aus tin, Texas Dear Sir; Opinion No. O-4030 Rer Does the stook transfer tax 1evLed by Article XV, House Bill 8, Acts, Regular Session 47th Legislature, accrue upon the delivery, in Texas, of shares ofstock or a foreign corporation, to the legates under a will or to an heir under statutes of desoent end distribution, where the transfer of suoh stock upon the books of the corporation and all other trans- actions relating thereto, transpired beyond the lim;Ltsof the State of Texas? Your letter of September.22, 1941 , submits for our opinion the following questlon: WI would appreoiate your offlalal opinion OR the following question which has been raised by the National Assooiation of SeourLties Dealers, Inc., nistriot Committee No. 6, pertaining to Artiole 15, of House Bill 8, this being the Stock Transfer Tax Law: "In oase of inheritanoe of stock in a foreign aorporation either by will or by the statute of descent and distribution, where the transfer is made outside the State of Texas, and the only thing done inside the State is the delivery of the stook certificate to the beneficiary, is the transaotion taxable?" A mere delivery, within the State of Texas, of shares or certificates of stock of a foreign or domestic corporation Is a taxable transaction under the above-cited Stook Transfer Tax Law, even though all other inoidents of the transfer, that~is, the agreement to sell, the sale and the transfer upon the stock book reaords of the corporation, all transpire extrastate. This was our holding in our Opinions No, O-3594 h, ~. Hon. George h. Sheppard - Page 2 O-4030 and O-3713, based upon the plain text of Section 1 of the Act, providing that "there is hereby imposed and levied a tax as hereinafter provided on all sales. agreements to sell. OF memoranda of sales, and all deliveries or transfers of shares, or certificates of stocks" etc. The Act expressly provides and we have heretofore held there- from, in our OPinion No. O-4028 to you, that the delivery only in Texas, unaccompanied by any of the other incidents of a stock transfer, of the mere legal or naked title to shares of stock, or certificates therefor, in a foreign corporation, as distinguished from the actual or benefioial ownership thereof, is a taxable event or transaction. This is established, without further argument, by the plain terms of Section 1 of the above- cited Stock Transfer Tax Law, reading as follows: "Section 1. There is hereby imposed and levied a tax as hereinafter provided on all sales, agreements to sell. or memoranda-of sales, and all deiiveries or transfers of shares, or certificates of stock. or certificates for rights-to stock, or certificates-of deposit representing an interest in or representing certificates made taxable under this Section in any domestic or foreign association, comoanv. or coruoration. or certificates of interest in any business conducted by trustee or trustees made after the effective date hereof, whether made upon or shown by the books of the association, company, corporation, or trustee, or by any assignment %n blank or by any delivery of any papers or agreement or memorandum or other evidence of sale or transfer or order for or agreement to buy, whether intermediate or final, and whether investing the holder with the beneficial interest in or legal title to such stock or other certifioate taxable hereunder, or wfth the Dossession or use thereof for any purpose, or to secure the future payment of money or the future transfer of any such stock, or certificate, on each hundred dollars of face value or fraction thereof, three (3) cents, ...'Ietc. (Underlining ours) The transfer or'delivery of stock by an executor or executrix, to a legatee receiving such stock under a last will and testa- ment, or by a duly qualified and acting administrator to a distributee or heir in instances where the stock is inherited under statutes of descent and distribution, is, in either contingency, the transfer or delivery of the le al title to Ahe such stock or certificate, as contradistinguis e beneficial interest therein or actual ownership thereof, so as to be brought squarely within the Incidence of the above tax levy, as indicated by the underlined portions thereof. Although our conclusion that thedslivery in Texas of the shares or certificates of stock of a foreign corporation, under the conditions and circumstances stated in your letter, is a tax Honorable George H. Sheppard - Page 3 O-4030 able transaction, may be amply sustained by the bare text of our Stock Transfer Tax Law, it is not amiss to refer to the persuasive construction placed upon substantially identical tax measures of the Federal govement and the State of New York, by rules and regulations duly promulgated by the administrative offioials of these respeative sovereign- ties. Article 34, Subdivision (n) of Regulations 71 of the United States Treasury Department regarding sales and transfers of stock (and similar interest) provides, in part, as follows: "The following are examples of transactions subject to the tax: 'I.... a(n) The transfer of stook by an administrator or an executor to the legatee or distributee." AFtiGle XVI (16) of the Information Relating-to the Stock Transfer Tax Law issued by the Stock Transfer Tax Bureau of the State of New York, gives, as an example of a taxable transaction, "the transfer of stock by an executor or administrator, whether to trustees, legatees or for other persons". g;e,';,zheabove considerations, it is our opinion that the within .theState of Texas of shares or certificates of stoc%'of a foreign corporation, l;y an executor or executrix to a legates taking such shares under a will and testament, or by an administrator to an heir or distributee, inheriting such stock under the laws of descent and distribution, would constitute and be a taxable event or tranaaotion, even though such deliver of stoak was the only act or thin done within this State, 9noident or pertaining to the tram Ber of such shares or oertifioates. Trusting the foregoing fully answers your inquiry, we are, Yours very truly, ATTORNEY GENERAL OF TEXAS s/ Pat M. Neff, Jr. BY PMN:FS/ag Pat M. Neff, Jr. Assistant APPROVED DEC. 19, 1941 s/ Grover Sellers FIRST ASSISTANT ATTORNEY GENERAL APPROVED OPINION COMMITTEE, By BWB, Chairman