ACQUISITION OF BANK GROUP WILL BE TAX-FREE 'C' REORGANIZATION.

UIL Number(s) 0368.03-00

                                             Date: September 25, 1991

This in reply to your letter of January 25, 1991, on behalf of the above-named taxpayers requesting supplemental ruling on the federal income tax consequences of the modification of a proposed transaction for which a letter ruling (LTR 9104026, October 30, 1990) has previously been issued. Additional information was furnished in letters dated September 11 and September 23, 1991. The steps contained in (i) and (ii) of the prior ruling have been consummated.

In your letter of January 25, 1991, it was stated that the step contained in (iii) of the previous letter, pertaining to the merger of Sub 3 with and into Target in accordance with, and pursuant to applicable state law, will no longer take place. Instead, as part of the overall transaction, Target will now merge with and into Sub 3 in accordance with, and pursuant to applicable state law. In view of this change, the prior ruling letter is hereby revoked, and the transaction is recharacterized as set forth below.

Parent is a registered savings and loan holding company and is the common parent of an affiliated group of corporations (hereinafter "Parent Group") that files consolidated federal income tax returns on the calendar year basis.

Parent's outstanding stock is publicly held and publicly traded.

Sub is a stock savings and loan association and is a wholly owned subsidiary of Parent. As a member of the Parent Group, Sub joins in filing consolidated federal income tax returns on a calendar year basis with the other members of the Parent Group.

Sub 2 is a wholly-owned subsidiary of Sub and, as a member of the Parent Group, joins in filing consolidated federal income tax returns on a calendar year basis with the other members of the Parent Group.

Sub 3 is a stock savings bank and is a wholly-owned subsidiary of Sub 2. As a member of the Parent Group, Sub 3 joins in filing consolidated federal income tax returns on a calendar year basis with the other members of the Parent Group.

Parent, Sub, Sub 2, and Sub 3 use the accrual method of accounting.

Target is a stock savings bank and is the common parent of an affiliated group of corporations that files consolidated federal income tax returns on a calendar year basis using the accrual method of accounting. Target is treated as a mutual savings bank for federal income tax purposes and maintains a reserve for bad debts under section 593 of the Internal Revenue Code.

Steps (i) and (ii) described in the prior ruling letter have been consummated as follows:

(i) Sub organized Interim for the sole purpose of merging into Target. Sub also organized NewSub for the sole purpose of holding the stock of Target. The merger of Interim into Target was effected in accordance with the applicable state law. All holders of Target Common Stock, other than holders who asserted dissenters' rights had their shares of Target Common Stock converted automatically into the right to receive shares of Parent voting common stock, the exchange ratio determined at or about the time of the exchange in the manner specified in the plan of reorganization.

(ii) Sub transferred the stock of Target to NewSub as a capital contribution.

Steps (iii) and (iv) described in the prior ruling letter will not be consummated and the new steps are proposed as follows:

(iii) NewSub will merge with and into Sub 2 in accordance with and pursuant to applicable state law. The Resulting Holding Company will acquire all of NewSub's assets and assume the liabilities. The outstanding NewSub stock will be converted into Resulting Holding Company stock and will continue to be owned by Sub.

(iv) Target will merge with and into Sub 3 in accordance with and pursuant to applicable state law. The Resulting Bank, as the surviving entity in the merger, will acquire all of the assets and assume the liabilities of Target. The outstanding Target stock will be converted by operation of law into Resulting Bank common stock and will be owned by Sub 2. Following the merger, Resulting Bank will continue the same business conducted by Target and Sub 3 prior to the merger under Sub 3's charter and name.

In connection with the rulings requested, the parties make the following representations:

(a) The fair market value of the Parent voting common stock received by each Target shareholder in the transaction plus the cash received in lieu of fractional share interest of Parent common stock, was approximately equal to the fair market value of the Target stock surrendered in the exchange.

(b) There was no plan or intention by the shareholders of Target who own 5 percent or more of Target common stock, and, to the best of the knowledge of the management of Target, there is no plan or intention on the part of the remaining shareholders of Target, to sell, exchange or otherwise dispose of a number of shares of Parent common stock received in the transaction that would reduce the Target shareholders' ownership of Parent common stock to a number of shares having a value, as of the date of the transaction, of less than 50 percent of the value of all of the formerly outstanding shares of Target common stock as of the same date. For purposes of this representation, shares of Target common stock surrendered by dissenters or exchanged for cash in lieu of fractional shares of Parent common stock have been treated as outstanding shares of Target common stock on the date of the transaction. Moreover, shares of Target common stock and shares of Parent common stock held by Target shareholders and otherwise sold, redeemed, or disposed of prior or subsequent to the transaction were considered in making this representation.

(c) Upon completion of steps (iii) and (iv) of the proposed transaction, Sub 3 will have acquired at least 90 percent of the fair market value of the net assets and at least 70 percent of the fair market value of the gross assets held by Target immediately prior to step (i) of the transaction. For purposes of this representation, amounts paid by Target to dissenters, amounts used by Target to pay its reorganization expenses, amounts paid by Target to shareholders who receive cash or other property, and all redemptions and distributions (except for regular, normal dividends) made by Target immediately preceding the transfer will be included as assets of Target held immediately prior to the transaction.

(d) Except with respect to fractional share interests, Parent has no plan or intention to reacquire any of its stock issued in the transaction.

(e) Parent has no plan or intention to sell or otherwise dispose of any of the assets of Target deemed to be acquired in the transaction (as described in ruling (1) below), except for dispositions made in the ordinary course of business or the deemed transfers from Parent to Sub, from Sub to Sub 2, and from Sub 2 to Sub 3 as described below.

(f) The stock deemed to have been received by Target was directly transferred to the Target shareholders in pursuance of the plan of reorganization.

(g) The liabilities of Target deemed assumed by Parent and the liabilities to which the transferred assets of Target are subject were incurred by Target in the ordinary course of its business.

(h) Following the transaction, Parent, Sub, Sub 2, and Sub 3, respectively, will continue the historic business of Target or use a significant portion of Target's historic business assets in a business.

(i) Parent, Sub, Sub 2, Sub 3, Target and the shareholders of Target will pay their respective expenses, if any, incurred in connection with the transaction.

(j) There is no intercorporate indebtedness existing between Parent and Target, Sub and Target, Sub 2 and Target, or Sub 3 and Target that was issued, acquired, or will be settled at a discount.

(k) None of the parties to the transaction are investment companies as defined in section 368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code.

(l) During the five years preceding the transaction, neither Parent, Sub, Sub 2 nor Sub 3 owned, directly or indirectly, any of the stock of Target, except in a fiduciary capacity.

(m) The adjusted basis and the fair market value of the assets deemed to be transferred from Target to Parent as a result of the proposed transaction will each equal or exceed the sum of the liabilities of Target deemed to be assumed by Parent including the amount of liabilities to which the assets to be transferred are subject.

(n) None of the parties to the transaction is under the jurisdiction of a court in a Title 11 or similar case within the meaning of section 368(a)(3)(A) of the Code.

(o) The payment of cash in lieu of fractional shares of Parent common stock was solely for the purpose of avoiding the expense and inconvenience to Parent of issuing fractional shares and did not represent separately bargained-for consideration. The total cash consideration that was paid in the acquisition to the Target shareholders instead of issuing fractional shares of Parent common stock did not exceed one percent of the total consideration that was issued in the acquisition to the Target shareholders in exchange for their shares of Target stock. The fractional share interests of each Target shareholder were aggregated, and no Target shareholder received cash for fractional share interests in an amount equal to or greater than the value of one full share of Parent common stock.

(p) None of the compensation received by any shareholder- employees of Target will be separate consideration for, or allocable to, any of their shares of Target stock; none of the shares of Parent common stock received by any shareholder-employees will be separate consideration for, or allocable to, any employment agreement; and compensation paid to any shareholder-employees will be for services actually rendered and will be commensurate with amounts paid to third parties bargaining at arm's-length for similar services.

(q) Parent has no plan or intention to liquidate Sub, to merge Sub into another corporation or to sell or otherwise dispose of the stock of Sub. Sub has no plan or intention to liquidate Sub 2, merger Sub 2 into another corporation or to sell or otherwise dispose of the stock of Sub 2. Sub 2 has no plan or intention to liquidate Sub 3, merger Sub 3 into another corporation or to sell or otherwise dispose of the stock of Sub 3.

(r) Target paid its dissenting shareholders the value of their common stock out of its own funds. No funds were applied for that purpose, directly or indirectly, by Parent, nor did Parent directly or indirectly reimburse Target for any payments to dissenters.

(s) No rights will be retained by Sub in any of the Target assets transferred to Sub 2. No rights will be retained by Sub 2 in any of the Target assets to be transferred to Sub 3.

(t) None of the Target assets to be transferred to Sub 3 will be leased back to Sub 2 or any related party other than for fair market rental negotiated at arm's-length in the normal course of business.

(u) Sub 3 will remain in existence and will retain use of the Target assets transferred to it in its business operations.

(v) Sub 3 will not dispose of any of the Target assets to be transferred to it in the proposed transaction, other than dispositions in the normal course of its business operations.

(w) There are no sales, exchanges or other transactions contemplated between Parent, Sub, Sub 2 and Sub 3 other than arm's-length transactions which may occur in the normal course of Sub 3's business operations.

(x) In each of the deemed transfers of Target assets and assumption of Target liabilities from Parent to Sub, from Sub to Sub 2, and from Sub 2 to Sub 3, the total adjusted basis and fair market value of the Target assets to be transferred to Sub 3 will each equal or exceed the sum of the amount of the Target liabilities to be assumed by Sub 3 plus the amount of any liabilities to which the Target assets to be transferred are subject. All of the liabilities were incurred in the ordinary course of business and are associated with the Target assets transferred.

(y) There is no plan or intention to liquidate Sub, Sub 2, or Sub 3 or to cause them to dispose of their assets other than the deemed transfer of Target assets from Sub to Sub 2 and from Sub 2 to Sub 3, except in the ordinary course of its business operations.

(z) Parent has no plan or intention to sell or otherwise dispose of any of its stock of Sub. Sub has no plan or intention to sell or otherwise dispose of any of its stock of Sub 2. Sub 2 has no plan or intention to sell or otherwise dispose of any of its stock of Sub 3.

(aa) No stock will be issued for services rendered or to be rendered to or for the benefit of Sub 3.

(bb) No stock will be issued for indebtedness of Sub 3 which is not evidenced by a security, or for interest on indebtedness of Sub 3 which accrued on or after the beginning of the transferor's holding period for the debt, if any.

(cc) No Target liabilities deemed to be assumed by Sub are liabilities owed to Sub. No Target liabilities deemed to be assumed by Sub 2 are liabilities owed to Sub 2. No Target liabilities to be assumed by Sub 3 are liabilities owed to Sub 3. Furthermore, there is no intercorporate indebtedness among any of the parties which was issued and acquired or will be settled at a discount.

(dd) Taking into account any issuance of additional shares of Sub, Sub 2, or Sub 3 stock; the issuance of addition Sub, Sub 2, or Sub 3 stock for services; the exercise of any Sub, Sub 2, or Sub 3 stock rights, warrants, or subscriptions; a public offering of Sub, Sub 2, or Sub 3 stock; or any disposition of Sub, Sub 2, or Sub 3 stock deemed received in the transfers described below, Parent will be in "control" of Sub, Sub will be in "control" of Sub 2, and Sub 2 will be in "control" of Sub 3 within the meaning of section 368(c).

(ee) There will be no indebtedness created in favor of Parent, Sub, or Sub 2 as a result of the proposed transaction.

(ff) Neither Sub, Sub 2, nor Sub 3 will be an investment company as defined in section 1.351-1(c)(ii) of the Income Tax Regulations.

(gg) There is no plan or intention by any of the parties to the proposed transaction to liquidate Sub, Sub 2, or Sub 3.

(hh) The fair market value of the stock of Sub deemed issued to Parent in the proposed transaction will be equal to the fair market value of the Target assets received less the Target liabilities assumed. The fair market value of the stock of Sub 2 deemed issued to Sub in the proposed transaction will be equal to the fair market value of the Target assets received less the Target liabilities assumed. The fair market value of the stock of Sub 3 deemed issued to Sub 2 in the proposed transaction will be equal to the fair market value of the Target assets received less the Target liabilities assumed.

Based on the facts and representations set forth herein, we rule that:

1. For federal income tax purposes, the consummated and proposed steps, as described above, will be disregarded. Instead the overall transaction will be considered as if (a) Parent acquired substantially all of the assets of Target in exchange solely for shares of Parent voting common stock and the assumption by Parent of the liabilities of Target, (b) Parent transferred the Target assets to Sub in constructive exchange for additional shares of Sub common stock and the assumption by Sub of the Target liabilities, (c) Sub transferred all of the Target assets to Sub 2 in constructive exchange for additional shares of Sub 2 common stock and the assumption by Sub 2 of the Target liabilities, and (d) Sub 2 transferred all of the Target assets to Sub 3 in constructive exchange for additional shares of Sub 3 common stock and the assumption by Sub 3 of the Target liabilities.

2. The acquisition by Parent of substantially all of the assets of Target in exchange solely for shares of Parent voting common stock and the assumption by Parent of the Target liabilities constitutes a reorganization within the meaning of section 368(a)(1)(C) of the Code. The reorganization will not be disqualified by reason of the constructive transfer by Parent of all of the Target assets to Sub (sections 368(a)(2)(C) and 351(a)) nor by the successive constructive transfers of all of the Target assets by Sub to Sub 2 and by Sub 2 to Sub 3, as described above (section 351(a) and Rev. Rul. 64-73, 1964-1 C.B. (Part 1) 142).

3. No gain or loss will be recognized by Target on the constructive transfer of substantially all of its assets to Parent solely in exchange for Parent common stock and the constructive assumption by Parent of the liabilities of Target (section 357(a) and section 361(a) of the Code).

4. No gain or loss will be recognized to Parent on the constructive receipt of the Target assets solely in exchange for Parent voting common stock (section 1032(a) of the Code).

5. The basis of the assets of Target in the hands of Parent will be the same as the basis of such assets in the hands of Target immediately prior to the transaction (section 362(b) of the Code).

6. The holding period of the assets of Target in the hands of Parent will include the holding period of those assets in the hands of Target immediately prior to the transaction (section 1223(2) of the Code).

7. No gain or loss will be recognized by the shareholders of Target upon the receipt of Parent common stock (including any fractional share interests) solely in exchange for Target stock (section 354(a)(1) of the Code).

8. The basis of the Parent common stock (including any fractional share interests) received by the Target shareholders will be the same as the basis of the stock of Target surrendered in exchange therefor (section 358(a)(1) of the Code).

9. The holding period of the Parent common stock (including any fractional share interests) received by the shareholders of Target will include the holding period of the Target stock surrendered in exchange therefor, provided that such stock was held as a capital asset in the hands of Target shareholders on the date of the exchange (section 1223(1) of the Code).

10. The payment of cash in lieu of fractional share interests of the Parent common stock will be treated as if the fractional shares were distributed as part of the exchange and then were redeemed by Parent. These cash payments will be treated as having been received as distributions in full payment in exchange for the stock redeemed, as provided in section 302(a) of the Code (Rev. Rul. 66-365, 1966-2 C.B. 116 and Rev. Proc. 77-41, 1977-2 C.B. 574).

11. No gain or loss will be recognized by Parent on the transfer of Target assets to Sub in constructive exchange for Sub stock and the assumption of Target liabilities as described in ruling (1) above. No gain or loss will be recognized by Sub on the subsequent transfer of Target assets to Sub 2, or by Sub 2 on the transfer of Target assets to Sub 3, in constructive exchange for Sub 2 and Sub 3 stock respectively and the assumption of Target liabilities as described in ruling (1) above (sections 351(a) and 357(a) of the Code).

12. No gain or loss will be recognized by Sub upon the constructive receipt of Target assets transferred to it by Parent in constructive exchange for Sub stock. No gain or loss will be recognized by Sub 2 upon the constructive receipt of Target assets transferred to it by Sub in constructive exchange for Sub 2 stock. No gain or loss will be recognized by Sub 3 on the receipt of Target assets transferred to it by Sub 2 in constructive exchange for Sub 3 stock (section 1032(a) of the Code).

13. The basis of the Sub stock deemed to be received by Parent, the basis of the Sub 2 stock deemed to be received by Sub, and the basis of the Sub 3 stock deemed to be received by Sub 2, will each be the same as the basis of the Target assets in the hands of the transferor, decreased by the sum of the liabilities deemed assumed and the amount of liabilities to which the Target assets are subject (section 358(a) of the Code).

14. The basis of the Target assets to be transferred, in each instance, will be the sage as the basis of such assets in the hands of the transferor immediately prior to the transfer (section 362(a) of the Code).

15. The holding period of the stock to be constructively received (as set forth above) will include the period during which the transferor held the Target assets which were constructively transferred, provided that the Target assets were capital assets on the date of the exchange (section 1223(1) of the Code).

16. The holding period of the Target assets transferred in the transaction will include the period during which the assets were held by the respective parties (section 1223(2) of the Code).

17. As provided by section 381(c)(2) of the Code and section 1.381(c)(2)-1 of the regulations, Sub 3 will succeed to and take into account the earnings and profits, or deficit in earnings and profits, of Target as of the effective date of the transfer. Any deficit in earnings and profits of either Sub 3 or Target will be used only to offset earnings and profits accumulated after the effective date of the transfer.

18. Except as otherwise provided in sections 382, 383 and 384 of the Code, pursuant to section 381(a)(1) of the Code and section 1.381(a)-1 of the regulations, Sub 3 will succeed to and take into account the items of Target described in section 381(c) of the Code.

No opinion is expressed about the tax treatment of the transaction under other provisions of the Code and regulations or about the tax treatment of any conditions existing at the time of, or effects resulting from, the transaction that are not specifically covered by the above rulings.

This ruling is directed only to the taxpayer who requested it. Section 6110(j)(3) of the Code provides that it may not be used or cited as precedent.

A copy of this letter should be attached to the federal income tax returns of the taxpayers involved for the taxable year in which the transaction covered by this ruling is consummated.

                                   Sincerely yours,