IRS Revenue Ruling
1998-41

 
 Code Sec. 584

<<FULL text>>

26 CFR 1.584-2; Income of participants in common trust fund.

Employees' trust's unrelated business taxable income. An employees'
trust's proportionate share of the income of a common trust fund in
unrelated business taxable income (UBT) to the extent that it would have
been if the investment producing the income had been made directly by the
employees' trust. Rev. Rul. 67-310 modified.


REV. RUL. 98-41

In Rev. Rul. 67-301, 1967-2 C.B. 146, an employees' trust, formed under
section 401(a) of the Internal Revenue Code and exempt under section
501(a), invested in a common trust fund that is exempt under section 584.
Rev. Rul. 67-301 concludes, in part, that the income of the common trust
fund is not unrelated business taxable income (UBTI) in the hands of the
employees' trust.

Section 1.584-2(c)(3) of the Income Tax Regulations provides that for
taxable years beginning on or after September 22, 1980, any amount of
income or loss of the common trust fund that is included in the
computation of a participant's taxable income for the taxable year shall
be treated as income or loss from an unrelated trade or business to the
extent that the amount would have been income or loss from an unrelated
trade or business if the investments of the common trust fund had been
made directly by the participant.

The discussion of UBTI in Rev. Rul. 67-301 is inconsistent with section
1.5842(c)(3). Therefore, Rev. Rul. 67-301 is modified to provide that the
employees' trust's proportionate share of the income of the common trust
fund is UBTI to the extent that it would have been if the investment
producing the income had been made directly by the employees' trust.


EFFECT ON OTHER REVENUE RULINGS

Rev. Rul. 67-301 is modified, effective for taxable years beginning on
or after September 22, 1980.


DRAFTING INFORMATION

The principal author of this revenue ruling is John Kramer of the
Office of the Assistant Chief Counsel (Passthroughs and Special
Industries). For further information regarding this revenue ruling contact
John Kramer on (202) 622-3060 (not a toll-free call).

<<END Ruling>>
 

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