.‘::. OFFICE OF ‘THE GENERAL, OF TEXAS 

.~’ ,AUSTXN 

Honorable 

‘comptroller of 

‘., &l8tin, Taaa : 

.~ .Doai Siri I. : i’ 

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oritlea upon whioh we ~. ; 

llevs it may ‘be helpful 

ubaoription warrantam. 

-I 

o bs wnrraata lseued by a 

et to atoak etidoaa- .! 

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Artlalo 15, R; B. S ROE. Se88.r 

ioh your request is ahated, was 

.i 

AOL A aomparleon Of the pertinent 

,, ro rtwenu~ m3afwe8. f5eom8 roquielta. Thus0 

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POF~~OJI? r0ii0w: ,-' 

.. *Art. 7047111. Stools trausror en4 saXerr tax- - I:‘

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Tax irqoaa4~ afrixlng atampa; mamorandum 0r sale ‘. 

.~ ~aSeotlOn 1.. Thoro I8 hereby imposed an4 levied i 

* a tax’ a8 herelaaftar provided on all tsal+m, agreomeata ;j . 

to oell, or nionoraa6a of salefi sad all~~4ellverle8 or 

’ ~.tnaoSoro or. &area, Or ar~tdoates of atoak, .or: ~’ ._ - j i 

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Bon. thorgo 8. Shoppar4, Page p! 

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oertiti 

oaten 0 f 

atao for rlghta to’etook:, or owtirldopooit rapresentla~ an intarest la 

or reprooeatlag oortltloates kado taxable under 

thla Sootioa ln any doneof or r0r0ir4 aesoolatlon, oozpany, or aorporatloa, or aertlrloateo 0r 

lnteroot la any bueiaeoo oonduotod by truoteo or 

truatoeo made aftor the 0rrOOtivd.9 Cat0 .horoor, 

whether UT&I upon or shown by th.3 books or the . 

~aoeoalation, donpeny, aorporatlon, or trustee, 

or by any asolgamcmt la bl’enk or by ‘any do1.ivez-y 

or any pagoro or egreomnt .or m0oorana0t3 or other . . 

srldonae or sale or transfer or order ror or agreemnt to buy, whethor iatermadiata or rinal, and 

wbethar lnvsotlng the holdor.uith the beneflolal 

late&A la or legal title to ouob atook or other 

oortifioate taxable horeundor, or wlth tho posses- .‘.. 

: olon or ~86 thsroot ror any purpose, or to oooura 

the rOm0. payment oi ~onoy or tbs ruture txwnotar of any ouah otock,, or aertiriaato, oa each : * *.. ‘.,: ~ 

hun4rs4 4ollaro of faoa~.valua or traatlon thereof, ~;;. 

‘tbrss.(S) oonto, ercrept in cases where tho shares 

or oartfffaatao ar6 loauo4 wfthcut dealgnats moaatary voluo, ln wblah aaoe the tax, shall be at .tho ., 

:, 

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$Fate ff thrqe (J) oonto to? eaoh and, avery.ahme. 

* . . 

IChapter 50 Civil ‘IA&J Uow York. 

8ubjeOt to Tax- provldos ati iOliOw8: 

*Tranofero 

“SOO. 270. Amount of tax - 1. There la hereby ,” 

impose4 au4 shall Sxae4latoly accrue an4 be aolleatod 

a tax, a8 herein provided, oa ~811 sale8 or s&room.i#o 

” to ~311, or me8ioranda 0r oale‘e an8 all .dellv~rieo or 

: tranofero OS shares or a0rtlilosteo ot otoak, or oortlrloateo oi rlghta to atook, or aertlfloatoo of intorest 

ia property or aooumulatlons, or aortiiioatss 0r depoolt 

reprooontlng aertlfloateo taxable under tblo artlolo, in 

any 4omaotio or foreign neeoolation, oo~~ptny or oorporatloa, or oortlfloatoo 0r interest la buaincoa oooduote6 

by a trustee or trustees msde artor the ilrot day or 

,..~ June, aiaotoea hundrad five, whether uado upoa or 

.ohownmby the. bOOk8 of thea aeeoalat~on, aozipany., apr- ,.. 

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poratlon or truotdo, or by any aoslfgumnt 1x1 blank, or 

:. . . by any dellvory, or by say paper or a&reom+at or niouo-.:. ‘. 

.; raadum or 4thor ~vl4enoo or sale or traaorer, whetheq : “. ‘.. , . ‘. : ” 

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lntamrodlate or final., ‘end ahether lnve6ting .I 

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.i ’ .tha holder wlth the bannefioial Intereat la or 

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.*. leeal’tit& to said otook, or other oortlSloetos 

tarable hefaun&er, or merely orith tho poe6e66lon. 

or me thoreOS for any purpose, or to Beauro the 

Suture paynen~ or money’, or t&e Sututa tranator 

of any such stock, or oort~tioatea.~ 

. We obeervo that the longuagd.os the tuo hots. doscribing the tranoaotiono taxable seeagpbroood in exactly tho ’ 

#arm uord6, though not arranead. In tbe eaaio oontlnulty. 9io 

’ ;Seif.to rind exgreas laLan(;uap in either of tbmo statutes attrmptlne to. levy a tar upon Ytlfihtn to aubecribe to stock.* 

: SUma tho United States Xnternnl iiovenuo Aot, Title . 

26, pqrqraph lf302b, U. S. C. A.. had Its lnaeption prior to 

the p66aee of the Toxaa statute, we nust grasumo that the 

:eglslatura bad ouoh Aot before It at .the tlma It adopted thm . 

Row York statute as the model for lts‘aSSort6. The exprers 

16nguage of f’ pert of the Federal Aot i0 a9 follows; ,, .- 

-(b) Sales and tranofoars. On all mlea, or 

agreemeat to aell,, or monrorando 0S eslos or. delivarlee or, or trapsfort of leg61 tltl@ to any ~0S 

tho~rbfnw or oert$Slaatas mcntlonad or described 

id euboootlon (e), oc to xkhta to subsdribe for ’ 

. .: or reoeloo’suoh ahares or oartlSlcate6~ whether 

m6tYe upon or shown by the. book0 of the oorporatlon 

, : or .othpr: Organl68tlOn, or by’anp 6t36lgUi~~nt in . 

bleak, or by any delivery,, Or by any paper or agree- ’ : ’ . 

meat or memorandum or other evldenaa of tran6SOr or : .~ 

: sale (whether ontitling the holder ia any uonnor to ,,’ .: s 

the bobeflt oS suoh ahaT oertlfioate, interest Or . 

rlehti, or not), on eoob &lob of per or faoo ,oalu6 : 

: 

or Sreotion thereof of the aertifloats6 OS suah 

oorcoratlon or other or&ealzatlon (or OS the 6haroe : 

wbero no’ oertifioatoa were iesueb) . . .*' 

: 

In ~o&Hzulng a etatute, the .gurpo~e lo to. eeaertaln 

the lo&lative intent end from ou,r oboorvatlon of the ex~resa 

rcvi~ions oS the tbres revenue maasure6, we Sind that mnse 

+-ST--- ‘IfIr ta to subsaribe to etoOk* though InelUded in the Podoral 

et?Auto in onritted Sran the fiat York and Tours statutes and we 

muet keep tb~tinotlon oloarly in dad in soeking to tletor; 

tin0 the intention or tho Lei3lalatUrO~ 
167 

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~0s. Coorgo 8. Shoppard, Page 4 

The Texas law being oS rOOat orluln, ha6 not been 

;ntorprett?d by Our OOUrt6, sad for that FeaBon, we mot turn 

to Now York dooIsion6 and ruleo and rogulotlano of Ite tax 

suthoritiee for a oomtruotlon of the quoatlon herein pro6entThe60, or oour60, aro not'conolu6Ive but are pOr6U6aIVO 

:% rhoulb bo 61vea @oat woI&ht. 

Conmon panotloe end prooeaure of aorporatlons doing 

busineos tbroueh the New York Etook Pxchan(~e uni!er nsthodr approved by the New York Tax Co~~~~lsslon should be oonsldercd Ja 

doterdnlne ~ranseotione taxable and tranoaotlona not taxable 

unbar Now York furlsprudonoe. Oboarvlng the rU1tl6 68 interprotod by ParagraFhh8 600000,60-300, InolusIre, the Corporation 

Tax Servlae, C. 0. Ii., 11. Y. 1; paragraph8 41004l34, Inoluei+e, Corporatloa Servloe,. Yrentioe-Hall, Vol. 1; kna Chrl6ty 

&XoLoaa, Tbo Tranofer of Stook, 2ntl Ed.; we observe thotr 

I. Subaorlptlon werrant 16 a oertISloato 

~srld~nolag tha right to aubeoribe to stook and Is' 

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t 

Issued by the oorporatlon to the titookholder ontitled * 

to the prlvllege of subscrIbIng to the stock to be la*- 

rutid. I”oragraFh 4108 and I’sragraph 4205, Premtlao-, 

Hall Corp. Serv., Vol. 1. 

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‘XL 

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Fresentatlon of warrant. 

(a) Tbo,warrant shall be preaeated to tho 

oorporatlon before tlio expiration date shown on 

,a. the SaOe of ouohwarrantaad upon suoh prO6Ont6- 

.: tlon the bearer nay 6ub6OrIbO to etook. ,fS full 

.“:. payment I6 made IOr the shares to .be iosued 6ub- 

.:.. 

6oriber la delivered a reoeI$ OvIdenolng hi6 rI&ht 

to the otook, entItlIng him on a spsoiflad datd~‘to 

uortaln full share6 or Sraotloa6l 6heres Of atOOk, 

subroquentlp bolng i66Ued OOrtlfiO6tO8 OS atook. 

F6ragraph 4208, Prontloo-Xall Corp. serv., Vol. 1. 

(b) .fn evant bearer eleots to pay for suoh ~’ 

share6 llr Inetallmeats be IS laouod a negotfablo '. 

.MOelpt, ovIdonoIng hi6 right to the stoak, entitl- 

*. '. ing the holdor on a 6peaIsIed date t0 OertalXi full 

ohare or .sraotlonal eharos~ or atook, and upon 

: -bin61 pqwmt, at the the an&In the mannor opeol- : 

‘Slad, &e ia iosuod, oortUloato8 of 6took. . 4 *. 

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168 

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son. Gaor~e Ii., ShepDard, Peg9 s 

Upon the tranarer by sala or otherwise of subsorlptlon nrrants, datlnad in Paragraph I above, the Federal Tax 

rppller and stampe ara roqulrad to be arrlxed and oanoalled. 

’ Tba Uaw Yor& tax doae not apply to this’ transaotloa. Paragraph 601lC9, C. .a.~ X., B. Y. 1; ,Paragreph 4205 and pa80 4148, 

Praatl00-Hall Corp. Sarv?, :Yol..l; 

563, page 834. 

Ohrioty & UoLaan, Paraereph 

Subsaquant to tha aot or subsoiibina to the atook by 

*.* a bolder oi a subscription warrant ,as described In Paragraph II. 

* (II) and (b) tbaraof, eny trensaotloa.involving the traoarar of 

the rl&ht- held by tha subsorlba~ requires the arrlxln6 and oan- 

.oallatlon of Unltad Stotae Revenue Staops and New York Revenue 

stamps. : Sohmar v. Rarflaa, 1m-a; ParaCrapb 4205, Sea. 7, 

Prantloa-Ralf Corp. Serv., Vol. 1; and Pnragraph 60-301, ~The 

.Qorporatlon Tax Servlo~, 0. 0. ?.. X.-Y; 1; .‘

, 

” : The State oi Naw York ‘Tax Department, Albanp;Naw York 

in l ‘,la.tter to the New York Stook Exchange, dated Kay S, 1922,. r&t 

“Ey ‘CartlilOata Of Richtis to Steak* IS meant 

o& sudh. oertlrloatas wbloh ontltla tha holder on 

._ 

a apsoiri6d d&e to oartaln run share8 op rrsatlolul 

share8 of atook. *Rights to oubacrlba’ to stock do’ 

not oozaa within this mean idaare n 

the statute.W (Undarsoorlng our5J 

Pursuant to a wzlttan request by the) wrltor tha State 

oi New York Dapartmant or .Taxetlon and Pinanaa answered by’ latter 

.&to6 l!?ar0h l;-1944, advlsl& u5 further +th refaronoa tb rubrorlptlon warrante that 8 uah are not taxable under New )lOrk Law. 

The partlnont. part or auoh. latter reads as lollowsr 

*The raderei rtook transrar tax law 40rititaly ‘. 

provides ior a tax on tranafers of laplal title to 

*rlp,hts to subeorlbe ror* atook. The New York law. 

has no slaillar provision. It does tax trauerara or 1~’ * 

.*oartirloatea ‘or ~rlghts to steak’ but tha Tax Cornmla8l0n has held that a oortltioate giVin6 tkP right 

;;o~$?Ohaer atook 1s not T oartirloote or A6hts t 

. 

*I osmiot rerer you’ to any oginlon. of our ,. 

2ttfkney Caneral: or to any dooleion of our ooUrt8 ,., 

on the quo&lo& : ?y way or- r.aaeonlng it may be. ..’ 

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..” pointed out that~ a right to subearlba So= stoak . . 

‘or a rjght to purchase stock is likely to be of’ . 

The aoaaldaratlon whloh must be 

Id for thi subeorlption or the purchase will 

n many oases, at least, represent as much as the 

: : stock 1s worth. It saama highly lnaquitabla~, 

tbaratora, to impose the 6ama tax on a transfer 

OS a stook purohasa warrant, (a oertlrlcate or a 

..~~ rl&ht to rooaiva stook after paying <or It) as on 

. a transrar 0r a’ .~artSriaatd giving a right to, ra- . 

oalva stoak without paying snything nor possibly 

some small amount ror axpanaas as in the ease, 

r0r axsmpla, or. a oorporata raorga;anlzatlon In 

whloh the holder of a bond is antltlad to receive 

stook. upon paying certain expans&s. It is believed 

.’ that New ,Pork never Intended to tax transtars OS 

tights to. aubecrlbe for stook and’ that the. Lmguaga 

oi the statute 80 lndloatas.~~ : i 

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Mtar amsidarlng all .ot the above, we must readily’ - ,.: 

aonolude that the transiar OS subsorlptlon warranta, though 

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taxed under l&a Federal Act, Is not tsxabla under .tha New. York 

Aot, Rowever, It follows .that subsequent to the aotlori or t@ . 

bearer OS suc& warrant ,ti subscrlblng Sor the stock that any 

transactiOA relating to the sale or other transfer oS.any OS 

the rights. or lntannedlata aartlSicatai avldanoing suoh rights 

is tqxs3le both ,undar; the Federal anil NWJ York lawsr : 

Froi the “l&ant ‘or subsoriblng to’the stoak until 

the aotual issuanoe OS certlPioatas OS stock; the transiar OS ,. 

the rights evidenced by lntarnediate oartlSlaatas is taxable. 

In New York, whether Sull payment is made at .the time oS sub- 

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aorlblng or whether a .por$lon oS the payment fe deferred. The 

leading. oasa In New York. touahing’ this ~point ‘1~s Sobmar vs; 

Herden, at.al, 216 N. Y1 ,728, ,111 N. R:llOO; reversing 165 

Appellate Dlvfsf’on, 855, ..151 N. Y. Suppi i 346i The par. ouri* 

opinion oS the Court or .Appeals adopted .as ‘Its oplnSon the 

diseaatlng opinion oS the lower Oourt; thataxt OS which is 

ZaOitad in rull .ln OUT ffpin+.to you, ~NoTi O-4026, ,: 

IA ~tha s”hiaer’ oisa supra *be r&llPta+ corn ani inOreased its oapitaf. stook and paa&ttad lts etockbo E ders the 

p~lpiollage OS puro&asing his portion Or the stook at’9175 par ,. 

ahare tha payma@.a. be!%9 ~darorred~ ., The .ogurt aald,. in part, 

66.$OhOWt ” .., . . 

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‘, ~on.!,Oaorga 8.’ Sbqqnril, Page 7 

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-. ” .* There were 51an8 llmltatlons on the 

I..:..: holder; &*thtwe now aheros. They were not to 

.. 

. . : hav0 ail 0r tba privllaga8 0r atoakholders until 

.’ “’ 

the tine1 payments, but ln the meentlxe they were 

pivea lntermodlata aortlfloatea, which satltled 

. . . I ‘:‘- them to reaeloe 7 par cent Interost upon the pertlon paid in, together with the right or making 

. . ‘ the flnsl pnymoats and reoelvlng the rlnal certI- 

. rioatba. Theea lntennerdlate c0rtirio~m were 

etook 0ertlrIcatee; thoy were transrorabls, and 

: .( ‘2 .gave ~fo the holder the rights or a otoakholder 

- upon the porf~rsmnc~o or the oonditloao. The foot ~.* :. . . . 

;. : , that they did not IrmadlatcQ invest tho holder with 

. .; all of the grivileeeo or the old oortlCIoatea IS or ’ 

no Iaportanoei oaoh or them ocrrtirlcatee ~.a:218 a 

‘paper or a(2reemeAt oraoziormlum or other evidence ‘. 

0r odle or timmrer~ Iatarzimllate to the rlael~ oertliioatee, and It (POa designed Co saoure the Wuturo 

tramfor aJ’ any ~t.ook,~ %hIch mipbt heve been soourod 

to,tho holdor thepaot. . i .* 

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Tba 6soI6Ion ik thi S&mr COJB, cu&a.doa8~not 

diaows the ‘queotlon herein r&104, but wo molto It aa oholaIn6 a distlnotioA between rights to otook evidenced by Inter- 

‘msdiste ‘oertifloatee Iaauod artor aubeorlotion, therein dlriouased, ead ri&hts ‘to aubsorlbe to ntook, o~idenoed by subrorlptlon warnrnto Itmuod before subticrlntion. 

SlAOO there haye bOaA A0 OOUrt dcolaloas or ruloe 

or re~ulatloas presorLbed by our taxing authorltles rolotlng 

to this subject, wo h8ve ttWAed to the rules and re&UlatiOAA 

Of the Now York Tax AUthorItlea. and .lnterpretntIon8 .Or the OOurtO 

in thet jurieprudance to datomlda tho aonetruotloa plcroed upoa : 

the provlalons of the New York Aot that wore rollowod as a model 

tOr the Texas rtatute.. Alter a study Of. the available authorlthe, the ou8tcxaa and owmon cueage approved by the Kew York Tar 

Dt?psrtceAt, ‘we flad that the tMln?der Or oubecrlptlon y18rXfint8 

la not taxable ia New York. It .hna long been the ouetom In Texar 

to &vs the s:&me ooaatruatlon to on Act that it roaelvsd in tho 

8tats where 8UOh Aat has been conetrued. Kay V. Sahnsider, 2Sl 

6, W. 680)’ 18 Corpus Jurie 717, olting owe0 tram 22 rtatea. 

w0 th0reror~ ad&e you that the trftneror or *sub- ” 

roriptloa wacraata*~Io not taxable under Artlole 7047% VerAotP8 

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. Boa. OeOr60~ IL .8bO~Paril, Patis ‘8 . 

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.. ¬ated Civil Statute& a’s again dsrlns ~suhaoriptloa 

. ~rrantd* t0 be w6rraAta i6SUdd by a oorporatlon to those 

matitled to oubaoribe to atook eoidoaolag their VI2hta to 

aubaOrib8 rOr atook.” . 

Opfnlon No. O-4029; delivered’ to you on Novsuther 

0, 1941, in60r6r as It la :n oonrllat horevrith, is heroby 

ovwnlled . In such opln~on rerereaoo was frequently made by 

ua to riqulatlona and Ioterpratatlona of the Unltod States 

. Troaaury Department rsgardlne tranaaotlona taxable under the 

. ~?eUeral Act. Since the Federal Act ooatalned express la-age 

1 levying a tax on rluhts to aubacrlbo to at-oak, and slaoe no auoh . 

express language la o~ta3Aea lo either tha Tetie or Now York 

, ~ .6tat~tea, we believe Opinion No. O-4029, ~Insorer an it oonatrusb 

the Aot to Qupoae a tax on the traaarer or subscription warranta, 

ta haVe been fn arror. In OVQrrt?liw Opinion No. 04029, wo rest ~, ’ 

upon the presumption tbat the le&latum had before It, at the 

' . tiai, (d the adoption 4 the Texas a$t%tute, the’exprsas lmgtmgo. f : __ 

.oontainod In tho Unltod State6 Revenue ‘meamre and la the New 

.York statute and that it wari. aware of! the Iaterpreta~loa given 

ia $bo Nesw- York jurIsdiotIoa, from whloh our atatutp lW6 takea, 

: anU that IB adOptb&~ .atmh &atUtO,, &j ++&a. alSO t0 OOgeOpt . . 

rpoh 0oa&ru0t10a. ~;I. . *’ .. ?.: >‘-- . . . ; - 

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: - . . . . Aiiiatant .