Rev. Rul. 64-59

Advice has been requested whether a fund maintained by a bank exclusive for the collective investment and reinvestment of moneys contributed thereto by the bank in its capacity as managing agent in accordance with section 9.1(g) and 9.18(a)(3) of Title 12 of the Code of Federal Regulations, as amended February 5, 1964, will qualify as a "common trust fund" within the meaning of section 584 of the Internal Revenue Code of 1954.

Section 9.18(a)(3) of Title 12 provides that where not in contravention of local law, funds held by a national bank as fiduciary may be invested collectively in a common trust fund, maintained by the bank exclusively for the collective investment and reinvestment of monies contributed thereto by the bank in its capacity as managing agent under a managing agency agreement expressly providing that such monies are received by the bank in trust.

Section 9.1(g) provides that "managing agent" means the fiduciary relationship assumed by a bank upon the creation of an account so entitled which confers investment discretion on the bank and imposes upon it the fiduciary responsibilities imposed upon trustees under will and deed.

Section 584(b) of the Code provides that a common trust fund shall not be subject to taxation under chapter 1 and for purposes of this chapter shall not be considered a corporation.

Section 584(a) of the Code provides, in part, that the term "common trust fund" means a fund maintained by a bank (1) exclusively for the collective investment and reinvestment of moneys contributed thereto by the bank in its capacity as a trustee, executor, administrator, or guardian; and (2) in conformity with the rules and regulations, prevailing from time to time, of the Comptroller of the Currency pertaining to the collective investment of trust funds by national banks.

Section 1.584-1(b) of the Income Tax Regulations provides, in part, that two conditions must be satisfied by a fund maintained by a bank before such fund may be designated as a "common trust fund." The first condition is that such fund must be maintained by a bank exclusively for the collective investment and reinvestment of moneys contributed thereto by the bank, whether acting alone or in conjunction with one or more co-fiduciaries, solely in its capacity (i) as a trustee of a trust created by will, deed, agreement, declaration of trust, or order of court, (ii) as an executor of the will of, or as an administrator of the estate of, a deceased person, or (iii) as a guardian (by whatever name known under local law) of the estate of an infant, of an incompetent individual, or of an absent individual. The second condition is that the fund must be maintained in conformity with the rules and regulations, prevailing from time to time, with respect to periods after September 27, 1962, of the Comptroller of the Currency, pertaining to the collective investment of trust funds by national banks, whether or not the bank maintaining such fund is a national bank or a member of the Federal Reserve System.

Thus, it is concluded that moneys received by a bank in its capacity as managing agent, as defined in section 9.1(g) of Title 12, under a managing agency agreement expressly providing that such moneys are received by the bank in trust, when placed in a common fund with other similar funds, will be contributed to the common fund by the bank in its capacity as "trustee" as that word is used in section 584 of the Code.

Accordingly, it is held that a fund maintained by a bank, exclusively for the collective investment and reinvestment of moneys contributed thereto by the bank, in its capacity as managing agent, in accordance with sections 9.1(g) and 9.18(a)(3) of Title 12 of the Code of Federal Regulations, as amended, will qualify as a "common trust fund" within the meaning of section 584 of the Code, provided the fund is operated in conformity with the rules and regulations, prevailing from time to time, of the Comptroller of the Currency pertaining to the collective investment of trust funds by national banks.

¹ Also released as Technical Information Release 544, dated Feb. 7, 1964.