| Date: | 10/08/1980 |
|---|---|
| Organization: | Massachusetts Department of Revenue |
| Referenced Sources: | Massachusetts General Laws |
Personal Income Tax
October 8, 1980
Re: ********** Unit
********** Trusts - Series 21, 22 and 23
This is in reply to your letter of October 7, 1980, requesting rulings with respect to the Massachusetts income tax consequences of ********** Unit Trusts - Series 21, 22 and 23 ("Series 21, 22 and 23 Trusts") now being organized by your client, ********** (********** "Sponsor").
On August 6 and September 25, 1980, this office issued a ruling and supplementary ruling regarding the ********** Unit Trust - Series 20 ("Series 20 Trust"). Like the Series 20 Trust, the Series 21, 22 and 23 Trusts will be organized in the form of unit investment trusts established under the laws of the Commonwealth of Massachusetts. The trustee of the Series 21, 22 and 23 Trusts will be ********** Trust Company of Boston and the Series 21, 22 and 23 Trusts' principal place of business will be in Massachusetts. Beneficial interests or shares in the Series 21, 22 and 23 Trusts will be represented by transferable certificates, which will be offered and sold primarily to Massachusetts residents. However, there is no requirement that Certificateholders be Massachusetts residents.
The Series 21, 22 and 23 Trusts will be organized to hold bonds the interest on which is exempt from federal and Massachusetts personal income taxes. ********** will act as the Sponsor of the Series 21, 22 and 23 Trusts. The Series 21, 22 and 23 Trusts will invest primarily in bonds of the Commonwealth of Massachusetts, its political subdivisions, and their agencies and instrumentalities. However, bonds issued by the Government of Puerto Rico or by its authority may also be included.
In addition to the investments described above, the Series 21, 22 and 23 Trusts may also invest up to, but not more than, 10% of their total assets in shares of one or more previous series of ********** Unit Trusts (the "Previous Trusts") which our client has organized. This office has previously ruled on the Massachusetts income tax consequences of each of the Previous Trusts in which the Series 20 Trust will invest.
The Trustee of the Series 21, 22 and 23 Trusts will not have authority to vary the original portfolio of investments purchased by the Trusts. Accordingly, under Section 301.7701 - 4(c) of the U.S. Treasury Regulations, the Series 21, 22 and 23 Trusts will be treated as trusts for federal income tax purposes and not as "associations" taxable as corporations. Moreover, since each Certificateholders will have the right at any time to revoke his interest in the Trusts by having his certificate redeemed, the Series 21, 22 and 23 Trusts will be treated for federal income tax purposes as "grantor trusts" under Section 676(a) of the Internal Revenue Code of 1954.
Subject to certain conditions, including the receipt of a favorable ruling from the Internal Revenue Service, which ruling has been received, Certificateholders in the Series 21, 22 and 23 Trusts will be afforded the opportunity to automatically reinvest principal and income distributions in units of other ********** Unit Trusts established by the Sponsor.
Based upon the foregoing, it is ruled that:
1. For Massachusetts personal income tax purposes, the Series 21, 22 and 23 Trusts will be treated as corporate trusts under Section 8 of Chapter 62 of the Massachusetts General Laws and not as grantor trusts under Section 10(e) of Chapter 62 of the Massachusetts General Laws.
2. Interest received by the Series 21, 22 and 23 Trusts on bonds of the Commonwealth of Massachusetts and its political subdivisions, their agencies and instrumentalities, and on bonds issued by the Government of Puerto Rico or by its authority will not be includible in the Massachusetts gross income of either the Series 21, 22 and 23 Trusts or their Certificateholders.
3. Gain or loss on the sale or exchange of bonds of the Commonwealth and its political subdivisions, their agencies and instrumentalities, except where specifically exempted by the act authorizing issuance of the bonds, will be includible in Massachusetts gross income of the Series 21, 22 and 23 Trusts.
4. Certificateholders of the Series 21, 22 and 23 Trusts who are subject to Massachusetts personal income taxes under Chapter 62 of the Massachusetts General Laws will not be required to include in their Massachusetts gross income distributions received from the Series 21, 22 and 23 Trusts.
5. Certificateholders of the Series 21, 22 and 23 Trusts who are subject to Massachusetts personal income taxes under Chapter 62 of the Massachusetts General Laws (a) will not be required to take into account in determining their Massachusetts gross income gain or loss realized by the Series 21, 22 and 23 Trusts on the disposition by the Series 21, 22 and 23 Trusts of a bond; but (b) will be required to take into account in determining their Massachusetts gross income gain or loss realized upon the sale or redemption of their Certificates.
6. Distributions received from any of the Previous Trusts in which the Series 21, 22 and 23 Trusts invest will not be included in the Massachusetts gross income of the Series 21, 22 and 23 Trust; but the Series 21, 22 and 23 Trusts will be required to take into account in determining their Massachusetts gross income gain or loss realized from the sale or redemption of all or any portion of their investment in any Previous Trust.
7. Certificateholders of the Series 21, 22 and 23 Trusts who are subject to Massachusetts personal income taxes under Chapter 62 of the Massachusetts General Laws will not be required to take into account in determining their Massachusetts gross income gain or loss realized by the Series 21, 22 and 23 Trusts on the sale, redemption or other disposition by the Series 21, 22 and 23 Trusts of all or any portion of their interest in any Previous Trust.
Very truly yours,
/s/L. Joyce Hampers
L. Joyce Hampers
Commissioner of Revenue
LR 80-64