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Rev. Rul. 1981-100 Document Info Printer

Revenue Rulings
Rev. Rul. 81-100

1981-1 C.B. 326, 1981-13 I.R.B. 33.

               Internal Revenue Service
                  Revenue Ruling

       GROUP TRUST; QUALIFIED RETIREMENT FUNDS AND INDIVIDUAL RETIREMENT

                    ACCOUNTS

               Published: March 30, 1981

26 CFR 1.501(a)-1: Exemption from taxation

(Also Sections 401, 408; 1.401-1, 1.408-2.)

  Group trust; qualified retirement funds and individual retirement
accounts.  Trusts that are parts of qualified retirement plans and
individual retirement accounts may pool their assets in a group trust
without affecting the exempt status of the separate trusts.  The group
trust may also qualify for exemption.  Rev. Ruls. 56-267 and 75-530
superseded.

  This revenue ruling restates and consolidates the positions stated under
Rev. Rul. 56-267, 1956-1 C.B. 206 and Rev. Rul. 75-530, 1975-2 C.B. 146,
under current law.

  The revenue rulings concern the effect on the tax exempt status of trusts
forming parts of qualified retirement plans and individual retirement
accounts of an arrangement under which the individual trusts pool their
assets in a group trust (usually created for the purpose of providing
diversification of investments), where the group trust is declared to be
part of the qualified plan or individual retirement account and the trust
instruments creating both the participating and group trusts provide that
amounts shall be transferred from one trust to the other at the direction
of the trustee of the participating trust.

  Section 501(a) of the Internal Revenue Code provides, in part, that a
trust described in section 401(a) shall be exempt from income tax.

  Section 401(a)(1) of the Code provides, in effect, that a trust or trusts
created or organized in the United States and forming a part of the stock
bonus, pension, or profit-sharing plan of an employer for the exclusive
benefit of its employees or their beneficiaries shall be qualified under
this section if contributions are made to the trust or trusts by such
employer, or employees for the purpose of distributing to such employees or
their beneficiaries the corpus and income of the fund accumulated in
accordance with such plan.

  By making contributions to a participating trust, which provides that
from time to time amounts so contributed may be transferred to and from a
specified group trust, the employer and any participating employees, in
effect, make contributions to the group trust for purposes of section
401(a)(1).

  Section 401(a)(2) of the Code provides that under each trust instrument
it must be impossible, at any time prior to the satisfaction of all
liabilities with respect to employees and their beneficiaries under the
plan and the trust or trusts, for any part of the corpus or income to be
used for, or diverted to, purposes other than for the exclusive benefit of
the employees or their beneficiaries.

  Section 408(e)(1) of the Code provides for the exemption from taxation of
individual retirement accounts which meet the requirements of section 408.
Section 408(a)(5) provides that the assets of the trust (individual
retirement account) may not be commingled with other property except in a
common trust fund or common investment fund.  With regard to section
408(a)(5), the Conference Committee stated that the conferees intend that
the assets of qualified individual retirement accounts may be pooled with
the assets of qualified section 401(a) trusts.    The conferees intended that
the group trust itself will be entitled to exemption from tax under the
Code.  See Conference Report No. 93-1280, 93rd Cong., 2nd Sess. 337 (1974),
1974-3 C.B. 415, 498.

  Held, if the requirements below are satisfied, a group trust is exempt
from taxation under section 501(a) of the Code with respect to its funds
which equitably belong to participating trusts described in section 401(a)
and is exempt from taxation under section 408(e) with respect to its funds
which equitably belong to individual retirement accounts, which satisfy the
requirements of section 408.  Also, the status of individual trusts as
qualified under section 401(a) or meeting the requirements of section 408
of the Code and exempt from tax under section 501(a) or 408(e),
respectively, will not be affected by the pooling of their funds in a group
trust if the following requirements are satisfied.

  (1) The group trust is itself adopted as a part of each individual
retirement account or employer's pension or profit-sharing plan.

  (2) The group trust instrument expressly limits participation to
individual retirement accounts which are exempt under section 408(e) of the
Code and employer's pension and profit-sharing trusts which are exempt
under section 501(a) of the Code by qualifying under section 401(a).

  (3) The group trust instrument prohibits that part of its corpus or
income which equitably belongs to any individual retirement account or
employer's trust from being used for or diverted to any purposes other than
for the exclusive benefit of the individual or the employees, respectively,
or their beneficiaries who are entitled to benefits under such
participating individual retirement account or employer's trust.

  (4) The group trust instrument prohibits assignment by a participating
individual retirement account or employer's trust of any 

part of its equity or interest in the group trust.

  (5) The group trust is created or organized in the United States and is
maintained at all times as a domestic trust in the United States.

  Rev. Rul. 56-267 and Rev. Rul. 75-530 are superseded because the
positions stated therein are restated under current law in this revenue
ruling.

Rev. Rul. 81-100, 1981-1 C.B. 326, 1981-13 I.R.B. 33.

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