Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 58-73

1958-1 C.B. 458

Caution: Obsoleted by Rev. Rul. 69-227

IRS Headnote

In the State of New York the transfer of securities from a donor to a custodian of a minor constitutes a transfer of legal title to the minor and is, therefore, subject to the documentary stamp tax imposed by sections 4321 and/or 4331 of the Internal Revenue Code of 1954. The subsequent transfer of such securities from the custodian to the minor upon the latter's attaining his majority is exempt from the documentary stamp taxes by section 4343(a) of the Code.

Full Text

Rev. Rul. 58-73

Advice has been requested concerning the applicability of the documentary stamp tax to the transfer of securities from a custodian, under Article 8-A of the Personal Property Law of New York, to a minor upon the minor's attaining the age of 21 years.

Sections 4321 and 4331 of the Internal Revenue Code of 1954 impose a tax on the sale or transfer of shares of stock and certificates of indebtedness, respectively.

Section 4342(a)(A) of the Code provides that the taxes imposed by sections 4321 and 4331 of the Code shall not apply to any delivery or transfer from the owner to a custodian if, under a written agreement between the parties, such instruments are to be held or disposed of by such custodian for, and subject at all times to the instructions of, the owners; or from such custodian to such owner.

Section 4343(a)(2) of the Code provides that the taxes imposed by sections 4321 and 4331 of the Code shall not apply to any delivery or transfer from a minor to his guardian, or from a guardian to his ward upon attaining majority.

Section 4344 of the Code provides that no exemption shall be granted under section 4342 or 4343(a) of the Code unless the delivery or transfer is accompanied by an exemption certificate.

Article 8-A of the Personal Property Law of New York provides that a gift of securities to a minor in the manner prescribed by the statute irrevocably conveys to the minor indefeasibly vested legal title to the securities. The law also provides that all registered securities held by the custodian shall be registered in his name followed by the words `as custodian for X , a minor under article eight-a of the personal property law of New York.' When the minor attains the age of 21 years, all property held by the custodian shall be delivered to the minor, and if the minor dies before attaining the age of 21 years the property must be delivered to the estate of the minor. The custodian holds `a power in trust' over the subject matter of the gift and also has the power to hold, manage, invest, and reinvest the property, collect the income therefrom and apply so much of the income and so much of the other property as he may deem advisable for the support, maintenance, education, and benefit of the minor.

The terms of the New York statute indicate clearly that the custodian has discretionary power in the management of the securities and is not a mere custodian within the meaning of the Code. Accordingly, the transfer of the securities from the donor to the custodian is not exempt from the tax under section 4342(a)(A) of the Code. However, the term `guardian' as used in section 4343(a)(2) of the Code is broad enough to comprehend the custodian relationship defined by Article 8-A of the New York statute.

Therefore, it is held that the transfer tax imposed by section 4321 and/or section 4331 of the Code attaches at the time the donor registers the securities in the name of the custodian or delivers them by deed or gift, thereby vesting legal title to the securities in the minor. The subsequent transfer of the securities from the custodian to the name of the minor upon the latter attaining his majority involves no transfer of legal title. That transaction would come within the exemption provided by section 4343(a)(2) of the Code applying to transfers from a minor to his guardian, or from a guardian to his ward upon attaining majority. Accordingly, the transaction would not be taxable, provided the delivery or transfer from the custodian to the ward is accompanied by an exemption certificate as required by section 4344 of the Code. This Revenue Ruling is equally applicable to similar transfers of securities in those states which have enacted statutes similar to Article 8-A of the Personal Property Law of New York.