Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 76-55

1976-1 C.B. 174

Section 584

IRS Headnote

Common trust fund; bank holding company member as cofiduciary. An existing qualified common trust fund maintained by a bank holding company member bank, which as cofiduciary accepts contributions from other member banks, will continue to qualify as a common trust fund; Rev. Ruls. 70-302 and 74-213 distinguished.

Full Text

Rev. Rul. 76-55

Advice has been requested whether, under the circumstances described below, a fund maintained by a member bank of a bank holding company may continue to qualify as a "common trust fund" within the meaning of section 584 of the Internal Revenue Code of 1954.

Bank X, which is one of several member banks of a registered bank holding company, maintains a trust fund for which it serves as sole trustee. The fund, as presently maintained, qualifies as a common trust fund under section 584 of the Code.

Several of the other member banks desired to operate common trust funds but, by themselves, could not economically provide the expertise and administrative personnel necessary for efficient trust operation and management. In order to provide adequate trust services to its customers, each bank proposes to include bank X as a cofiduciary of its trust accounts. For example, if a customer of a member bank needs or desires the services of a corporate trustee or executor, a trust officer of the member bank, together with a trust officer of bank X, will evaluate the needs of the customer and prepare an acceptable program under which bank X will be either a cotrustee or coexecutor with the member bank under the appropriate trust instrument or will.

As to existing trust agreements or wills, customers will be encouraged to amend such instruments, if allowable under provisions of the particular documents and applicable state law, in order to name bank X as cofiduciary.

Bank X will invest trust accounts of which it is a cofiduciary in the common trust fund it maintains.

Section 584(a) of the Code provides, in pertinent part, that the term "common trust fund" means a fund maintained by a bank exclusively for the collective investment and reinvestment of moneys contributed thereto by the bank in the capacity as a trustee, executor, administrator, or guardian.

Section 1.584-1(b) of the Income Tax Regulations provides, in pertinent part, that under section 584 of the code, certain 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 the 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, but solely in its capacity as a trustee of a trust created by will, deed, agreement, declaration of trust, or order of court, as an executor of the will of, or as an administrator of the estate of, a deceased person, or 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 this case the common trust fund is maintained solely by one bank, bank X, exclusively for the collective investment and reinvestment of moneys contributed thereto by that bank acting as a cofiduciary in one of the capacities stated in the regulations. Accordingly, in the instant case, the common trust fund that otherwise qualified as a common trust fund under section 584 of the Code will continue to so qualify after the arrangement described above is put into operation.

The facts in the instant case are distinguishable from those in Rev. Rul. 70-302, 1970-1 C.B. 140, and Rev. Rul. 74-213, 1974-1 C.B. 146, since in those two Revenue Rulings each of the contributing banks participated in maintaining the common trust funds.

Rev. Rul. 70-302 and Rev. Rul. 74-213 are distinguished.