Rev. Rul. 78-319

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 that it maintains exclusively for the collective investment and reinvestment of moneys contributed to the fund by the bank in its capacity as a trustee, executor, administrator, guardian, "donee of a power during minority to manage property vested in an infant," or "committee." The fund is maintained 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.

Under the laws of the state in which the bank is located, a "donee of a power during minority to manage property vested in an infant" is generally an individual, other than the surviving parent of a child, who is appointed by will as the guardian of the child. The state law operates to make ineffective such an appointment if the surviving parent is competent, but vests in the appointee all the rights and duties of a guardian with respect to the property passing to the child under the will.

The state law gives certain courts jurisdiction over the person and property of incompetents. In exercising custody, the court may appoint a "committee" of one or more individuals to manage the incompetent's person, property, or both. The duties and powers of a committee are delineated by state law and are virtually identical to those of a guardian. The law requires close court supervision of both a committee and a donee of a power during minority to manage property vested in an infant.

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.

With respect to the bank acting in its capacity as a guardian, section 1.584-1(b)(1) of the Income Tax Regulations provides that the bank must act 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.

In Rev. Rul. 74-343, 1974-2 C.B. 176, a bank, pursuant to a court decree, was appointed conservator of the property of an adult who was incapable of managing the individual's own affairs, but who had not been declared incompetent by the court. The bank contributed property of the individual to a fund that otherwise qualified as a common trust fund pursuant to section 584(a) of the Code. The Revenue Ruling holds that the fund continued to qualify as a common trust fund because the bank as conservator had substantially the same status as a guardian under the law of the state in which the bank was located.

In this case, under the laws of the state in which the bank is located, both a donee of a power during minority to manage property vested in an infant and a committee have substantially the same status as a guardian under the state's law.

Accordingly, the fund qualifies as a common trust fund within the meaning of section 584(a) of the Code.