Internal Revenue Service
Revenue Ruling

TaxLinks.com   sm

 Rev. Rul. 55-97

1955-1 C.B. 512

Caution: Obsoleted by Rev. Rul. 69-227

Full Text

Rev. Rul. 55-97

A corporation executed its bond secured by a mortgage on real property, and subsequently conveyed the mortgaged property to its straw man who on the same day entered into an agreement with the mortgagee to extend the maturity date of the bond. Immediately thereafter the straw man reconveyed the mortgaged property to the corporate mortgagor. Held , the undertaking renewed is a corporate obligation subject to the documentary stamp tax imposed by section 1801 of the Internal Revenue Code of 1939, inasmuch as the corporation continues to be required to pay the debt as a condition to its continued ownership and use of the property, and if the debt is not paid in accordance with the terms of the instrument, it must satisfy the obligation to the extent of its property securing the debt. The general charge on the corporation is changed in substance by the straw man renewal to a charge on specific corporate property. However, the corporate character of the obligation is not changed for the reason that the corporation must either pay its debt or surrender its property securing such payment. This fact renders the obligation an undertaking to pay out of a specified fund or source and such undertaking is sufficient to warrant imposition of the tax. Accordingly, the extension of the bond constitutes a renewal thereof within the meaning of section 1801 of the Code