SURVEY OF C CORPORATION/REGULATED INVESTMENT COMPANY MERGERS AND ACCUMULATED C CORPORATION EARNINGS AND PROFITS

June 24, 1991 TO: TAX COMMITTEE NO. 19-91 RE: SURVEY OF C CORPORATION/REGULATED INVESTMENT COMPANY MERGERS AND ACCUMULATED C CORPORATION EARNINGS AND PROFITS __________________________________________________________ As you know, for tax years beginning on or after January 1, 1983, section 852(a)(2) of the Internal Revenue Code (the "Code") provides that for an entity to remain qualified as a regulated investment company ("RIC"), either (1) the entity must be a RIC for all taxable years ending on or after November 8, 1983, or (2) as of the close of the taxable year, the investment company has no earnings and profits accumulated in any year in which the investment company was not a RIC. This provision was added to the Code by the Deficit Reduction Act of 1984 ("DEFRA"). We have recently learned that the Internal Revenue Service is considering the retroactive application of section 852(a)(2) to mergers between a C corporation and a RIC as well as conversions of a C corporation into a RIC. Thus, a C corporation would be required to distribute any accumulated earnings and profits prior to any merger with a RIC after January 1, 1983. To assess the impact of this possible interpretation the Institute would appreciate receiving information regarding any RIC - C corporation mergers occurring after January 1, 1983. Please return the attached survey to the undersigned no later than Monday, July 1, 1991. The fax number is (202) 659-1519. David J. Mangefrida, Jr. Assistant Counsel - Tax Attachment