IRS TO ISSUE GUIDANCE ON MERGERS OF CORPORATIONS INTO REGULATED INVESTMENT COMPANIES

May 27, 1992 TO: MEMBERS - ONE PER COMPLEX NO. 17-92 RE: IRS TO ISSUE GUIDANCE ON MERGERS OF CORPORATIONS INTO REGULATED INVESTMENT COMPANIES __________________________________________________________ The Internal Revenue Service recently released its "business plan" for 1992 which identifies, as one project that it intends to complete by year-end, the issuance of guidance under section 852(a)(2) of the Internal Revenue Code regarding the consequences of merging a corporation not organized as a regulated investment company ("RIC"), such as a personal holding company, into a RIC. Specifically, we understand that the IRS is considering an interpretation of section 852(a)(2), as amended with respect to taxable years beginning after December 31, 1982, that could effectively require that a non-RIC distribute to its shareholders all of its accumulated earnings and profits prior to merging into a RIC. Any merger of a non-RIC into a RIC that occurred after December 31, 1982 could be affected by any such IRS interpretation. One possible approach that the IRS may be considering to this "retroactivity" issue would require that the amount of the non-RIC’s accumulated earnings and profits at the time of the merger be distributed, within some period ending after the date of the IRS announcement, to the RIC’s current shareholders. To determine the extent to which any IRS announcement regarding mergers of non-RICs into RICs might affect the industry, we request that each fund complex that has engaged in any non-RIC--RIC merger since 1982 contact the undersigned at (202) 955-3585. We will keep you informed of developments. Keith D. Lawson Associate Counsel - Tax KDL:bmb