[10430]
November 3, 1998
TO: TAX COMMITTEE No. 35-98
RE: INSTITUTE LETTER TO IRS ON FASIT REGULATIONS
______________________________________________________________________________
As you may recall, the financial asset securitization investment trust ("FASIT") provisions of the
Internal Revenue Code were enacted in 1996 to simplify the structure for securitizing certain debt
obligations such as credit card receivables, home equity loans and auto loans. In the attached letter to the
Internal Revenue Service and the Treasury Department, the Institute recommended that the regulations to
be issued under the FASIT provisions clarify that the term "cash equivalents" includes shares of a money
market fund. This clarification would permit FASITs temporarily to invest excess cash in money market
funds. The letter states, among other things, that many investors hold shares in money market funds for
cash management purposes and that money market funds should be treated as "cash equivalents" for
purposes of the FASIT regulations because, from a cash management perspective, they function in a
manner sufficiently similar to bank accounts.
Anne M. Barr
Associate Counsel
Attachment