Internal Revenue Service
Revenue Ruling

TaxLinks.com   sm

 Rev. Rul. 66-67

1966-1 C.B. 191

Sec. 1244

IRS Headnote

The minutes of a board of directors' meeting can qualify as a `plan' within the meaning of section 1244(c)(1)(A) of the Internal Revenue Code of 1954 if they contain all of the required elements of a `plan' as specified in that section of the Code and the regulations thereunder.

However, the minutes of a corporation's board of directors' meeting, which merely authorized the issuance of common stock and failed to specify the maximum amount to be received or the particular period of time during which the stock would be offered, do not qualify as a `plan' within the meaning of section 1244(c)(1)(A) of the Code.

Full Text

Rev. Rul. 66-67

Advice has been requested whether the minutes of a corporation's board of directors' meeing can ever qualify as a `plan' within the meaning of section 1244(c)(1)(A) of the Internal Revenue Code of 1954 and, if so, whether the minutes described below so qualify.

A corporation was organized on January 1, 1964. The minutes of the initial board of directors' meeting show that a resolution was passed which authorized the board of directors to issue a certain amount of unsubscribed capital common stock in the corporation, in such amounts, at such times and for such terms as the board of directors may deem necessary for the business of the corporation.

Between January 1, 1964, and March 31, 1964, the board of directors caused one hundred shares of common stock in the corporation to be issued pursuant to the above-mentioned resolution.

Section 1244 of the Code provides that in certain cases a loss on `section 1244 stock' may be treated as an ordinary loss. Section 1244(c)(1)(A) of the Code provides, in part, that the term `section 1244 stock' means common stock in a domestic corporation if such corporation adopted a plan after June 30, 1958, to offer such stock for a period (ending not later than 2 years after the date such plan was adopted) specified in the plan.

Section 1.1244(c)-1(c) of the Income Tax Regulations provides, in part, as follows:

Written plan .-(1) The common stock must be issued pursuant to a written plan adopted by the corporation after June 30, 1958, to offer only such stock during a period specified in the plan ending not later than two years after the date the plan is adopted. * * * The plan must specifically state, in terms of dollars, the maximum amount to be received by the corporation in consideration for the stock to be issued pursuant thereto.

The minutes of a board of directors' meeting can qualify as a `plan' within the meaning of section 1244(c)(1)(A) of the Code if they contain all of the required elements of a `plan' as specified in that section of the Code and the regulations thereunder.

The minutes of the board of directors' meeting in this case contained merely a resolution which authorized the directors to issue, at their discretion, a certain amount of capital common stock. The resolution failed to establish a period of time during which the stock would be offered for sale, which period would expire not later than 2 years from the date of the resolution. Further, it did not specify, in terms of dollars, the maximum amount to be received as consideration for the stock.

Accordingly, the minutes of the corporation's board of directors in this case do not qualify as a `plan' within the meaning of section 1244(c)(1)(A) of the Code and section 1.1244(c)-1(c) of the regulations.