May 8, 1979
This is in reply to your letter of March 20, 1979 requesting rulings on behalf of [a] Mutual Fund ********** ("Corporation") with respect to the Massachusetts corporate excise and income tax consequences of the Corporation's proposed change of legal status and domicile from that of a New York business corporation to a Massachusetts business trust.
The Corporation is a New York business corporation which operates as a diversified, open-end management company registered under the Investment Company Act of 1940. It is now proposed to form a Massachusetts business trust (the "Trust") and cause the Corporation to transfer substantially all of its assets to the Trust in exchange for shares of beneficial ownership of the Trust, which shares will then be distributed to the Corporation shareholders in liquidation.
The Agreement and Declaration of Trust for the Trust provides that all shares of each particular series of shares under the Trust shall be transferable and that each holder of Trust shares shall have the right at all times to require the Trust to redeem all or any part of his shares of a particular series at a redemption price equal to the net asset value per share of that series.
The Corporation has applied to the United States Internal Revenue Service for certain rulings with respect to the federal income tax consequences of the proposed reorganization.
The rulings in this letter are conditioned upon
(a) The change in the Corporation's legal status and domicile through the transaction described herein and in the federal ruling request will constitute a reorganization within the meaning of Section 368 (a) (1) (F) of the Internal Revenue Code, and the federal income tax consequences of that reorganization will be as set forth in the ruling requested under Part IV of the federal ruling request.
(b) The Corporation currently qualifies, and the Trust will qualify, as a regulated investment company taxable in accordance with Subchapter M of the Code.
Subject to the above conditions it is hereby ruled:
1. The proposed Trust will be a "corporate trust" within the meaning of Massachusetts General Laws Chapter 62, Section 1(j).
2. As a corporate trust, the Trust will not be taxed as a security corporation under Massachusetts General Laws Chapter 63, Section 38B, and will not be subject to taxation under Chapter 63.
3. Pursuant to Massachusetts General Laws Chapter 62, Section 8(b)(i), the Trust, as a regulated investment company under Section 851 of the Internal Revenue Code, will not be subject to the taxes imposed by Chapter 62.
4. Because neither the Corporation nor the Trust will recognize any gain or loss for Federal income tax purposes pursuant to Section 361(a) and Section 1032(a) of the Code, neither shall recognize any gain or loss for Massachusetts tax purposes pursuant to Massachusetts General Laws Chapter 62 and Chapter 63.
5. Because the shareholders of the Corporation who become Trust shareholders in the proposed transaction will not recognize any gain or loss for Federal income tax purposes pursuant to Section 354(a) of the Code, they will not recognize any gain or loss for Massachusetts tax purposes pursuant to Massachusetts General Laws Chapter 62.
6. The Trust's basis in the assets transferred to it by the Corporation will be the same as the Corporation's basis in those assets for Massachusetts tax purposes, and a shareholder's basis in his Trust shares will be the same as the basis in his Corporation shares for Massachusetts tax purposes.
Very truly yours,
/s/L. Joyce Hampers
L. Joyce Hampers
Commissioner of Revenue