Rev. Rul. 74-343

Advice has been requested whether, under the circumstances described below, a fund maintained by a national bank qualifies as a "common trust fund" within the meaning of section 584(a) of the Internal Revenue Code of 1954.

The bank established a fund which is maintained exclusively for the collective investment and reinvestment of moneys and securities contributed thereto by the bank in its capacity as trustee, executor, administrator, guardian, or conservator.

Pursuant to a court decree, the bank was appointed conservator of the property of an adult individual who could not manage his own affairs but who had not been declared incompetent. The bank, acting in the capacity of the conservator, contributed the property of the individual to the fund for investment.

Under the statutes of the State in which the bank is located, a conservator has substantially all of the same fiduciary responsibilities, powers, and duties as a guardian of an incompetent person except for the custody of such person.

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 that 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." One of these conditions 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 cofiduciaries, 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.

Accordingly, since the conservator in the instant case has substantially the same status as a guardian under the State statutes, the contribution of the property to the fund by the bank in its capacity of conservator satisfies the condition set forth above in section 1.584-1(b) of the regulations. Further, the fund maintained by the bank exclusively for the collective investment and reinvestment of moneys contributed thereto by the bank in its capacity as trustee, executor, administrator, guardian, or conservator qualifies as a "common trust fund" within the meaning of section 584(a) 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.