July 14, 1994

You request a ruling with respect to the Massachusetts tax consequences of the conversion of the *************** ("Bank") from a Massachusetts chartered mutual savings bank to a Massachusetts chartered stock savings bank ("Subsidiary Savings Bank").

The facts described in your letter are as follows. The Bank is an accrual method, state-chartered mutual savings bank engaged in banking in Massachusetts. The Bank maintains a bad debt reserve under section 593 of the Internal Revenue Code of 1986, as amended. The Bank computes taxable income on the basis of a taxable year ending December 31st. As a mutual savings bank, the Bank has no authorized capital stock. Rather, liquidation and voting rights in respect of the Bank are held by the Bank's depositors. In order to stimulate growth and expansion of the Bank through the raising of additional capital, the Bank proposes to convert itself into a stock savings bank.

The Bank will amend and restate its charter to become *************** ("MHC"), a Massachusetts mutual holding company. The MHC will establish the Subsidiary Savings Bank as a Massachusetts chartered stock savings bank. The MHC will transfer a substantial part of its assets (including the name ***************) to the Subsidiary Savings Bank in exchange for one hundred percent of the common stock of the Subsidiary Savings Bank and the Subsidiary Savings Bank's assumption of the liabilities (including deposit liabilities) of the MHC.

The conversion will be effected in accordance with the provisions of M.G.L. c. 167H and pursuant to the Plan of Reorganization adopted by the Board of Trustees and the Corporators of the Bank.

The MHC and the Subsidiary Savings Bank will each compute its taxable income using the accrual method of accounting and on the basis of a taxable year ending December 31st. Upon the exchange, those persons who, immediately prior to the exchange, held depository rights in respect of, or other rights as creditors of, the Bank shall thereafter have such rights solely with respect to the Subsidiary Savings Bank, and the corresponding liability or obligation of the Bank to such persons will be assumed by the Subsidiary Savings Bank. Each deposit account in the Bank at the time of the exchange will constitute, without payment or further action by the account holder, a deposit account in the Subsidiary Savings Bank equal in dollar amount, interest rate, maturity and other terms and conditions as such deposit account in the Bank immediately prior to the transaction. All persons who had liquidation rights with respect to the Bank, will continue to have such rights solely with respect to the MHC.

The Bank has requested a ruling from the Internal Revenue Service that the change in form of operation of the Bank from a mutual savings bank to a stock savings bank will not result in the recognition of gross income, gain or loss for federal income tax purposes. I.R.C. §§ 351(a) & 357(a).

Based on the foregoing, and provided that the transaction is treated in the same manner for federal income tax purposes, it is ruled for Massachusetts purposes:

1. The Mutual Holding Company ("MHC") will be a domestic corporation, as defined under G.L. c. 63, § 30, and will be subject to tax under Chapter 63 of the General Laws of Massachusetts.

2. The Subsidiary Savings Bank will continue to be subject to tax under G.L. c. 63, § 2.

3. No gain or loss will be recognized by either the Bank or the Subsidiary Savings Bank as a result of the conversion.

4. The MHC's basis in the common stock of the Subsidiary Savings Bank will be the same as the basis of the property transferred in exchange therefor, reduced by the sum of the liabilities assumed by the Subsidiary Savings Bank or to which assets transferred are taken subject.

5. The MHC's holding period for the common stock of the Subsidiary Savings Bank received in the transaction will include the period during which the property exchanged was held by the Bank provided that such property was a capital asset in the hands of the Bank on the date of the exchange.

6. The Subsidiary Savings Bank's basis in the property received from the MHC will be the same as the basis of such property in the hands of the Bank immediately prior to the exchange.

7. The Subsidiary Savings Bank's holding period for the property received from the MHC will include the period during which such property was held by the Bank.

No ruling was requested and no ruling is offered with respect to the tax consequences of those persons holding depository rights or other rights as creditors of the Bank.

Very truly yours,

/s/Mitchell Adams

Mitchell Adams
Commissioner of Revenue

/s/Jonathan F. Light
by Jonathan F. Light

MA:HMP:dmm

LR 94-3