§584. Common trust funds

(a) Definitions

For purposes of this subtitle, 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-

(A) as a trustee, executor, administrator, or guardian, or

(B) as a custodian of accounts-

(i) which the Secretary determines are established pursuant to a State law which is substantially similar to the Uniform Gifts to Minors Act as published by the American Law Institute, and

(ii) with respect to which the bank establishes, to the satisfaction of the Secretary, that it has duties and responsibilities similar to duties and responsibilities of a trustee or guardian; and

(2) in conformity with the rules and regulations, prevailing from time to time, of the Board of Governors of the Federal Reserve System or the Comptroller of the Currency pertaining to the collective investment of trust funds by national banks.

For purposes of this subsection, two or more banks which are members of the same affiliated group (within the meaning of section 1504) shall be treated as one bank for the period of affiliation with respect to any fund of which any of the member banks is trustee or two or more of the member banks are cotrustees.

(b) Taxation of common trust funds

A common trust fund shall not be subject to taxation under this chapter and for purposes of this chapter shall not be considered a corporation.

(c) Income of participants in fund

Each participant in the common trust fund in computing its taxable income shall include, whether or not distributed and whether or not distributable-

(1) as part of its gains and losses from sales or exchanges of capital assets held for not more than 1 year, its proportionate share of the gains and losses of the common trust fund from sales or exchanges of capital assets held for not more than 1 year,

(2) as part of its gains and losses from sales or exchanges of capital assets held for more than 1 year, its proportionate share of the gains and losses of the common trust fund from sales or exchanges of capital assets held for more than 1 year, and

(3) its proportionate share of the ordinary taxable income or the ordinary net loss of the common trust fund, computed as provided in subsection (d).

(d) Computation of common trust fund income

The taxable income of a common trust fund shall be computed in the same manner and on the same basis as in the case of an individual, except that-

(1) there shall be segregated the gains and losses from sales or exchanges of capital assets;

(2) after excluding all items of gain and loss from sales or exchanges of capital assets, there shall be computed-

(A) an ordinary taxable income which shall consist of the excess of the gross income over deductions; or

(B) an ordinary net loss which shall consist of the excess of the deductions over the gross income; and

(3) the deduction provided by section 170 (relating to charitable, etc., contributions and gifts) shall not be allowed.

(e) Admission and withdrawal

No gain or loss shall be realized by the common trust fund by the admission or withdrawal of a participant. The admission of a participant shall be treated with respect to the participant as the purchase of, or an exchange for, the participating interest. The withdrawal of any participating interest by a participant shall be treated as a sale or exchange of such interest by the participant.

(f) Different taxable years of common trust fund and participant

If the taxable year of the common trust fund is different from that of a participant, the inclusions with respect to the taxable income of the common trust fund, in computing the taxable income of the participant for its taxable year, shall be based upon the taxable income of the common trust fund for any taxable year of the common trust fund ending within or with the taxable year of the participant.

(g) Net operating loss deduction

The benefit of the deduction for net operating losses provided by section 172 shall not be allowed to a common trust fund, but shall be allowed to the participants in the common trust fund under regulations prescribed by the Secretary.

(h) Taxable year of common trust fund

For purposes of this subtitle, the taxable year of any common trust fund shall be the calendar year.

(Aug. 16, 1954, ch. 736, 68A Stat. 203 ; Sept. 28, 1962, Pub. L. 87–722, §4, 76 Stat. 670 ; Feb. 26, 1964, Pub. L. 88–272, title II, §201(d)(5), 78 Stat. 32 ; Sept. 17, 1976, Pub. L. 94–414, §1, 90 Stat. 1273 ; Oct. 4, 1976, Pub. L. 94–455, title XIV, §1402(b)(1)(H), (2), title XIX, §§1901(b)(1)(G), 1906(b)(13)(A), title XXI, §§2131(d), 2138, 90 Stat. 1732 , 1790, 1834, 1924, 1932; May 23, 1977, Pub. L. 95–30, title I, §101(d)(7), 91 Stat. 133 ; Apr. 2, 1980, Pub. L. 96–223, title IV, §404(b)(3), 94 Stat. 306 ; Aug. 13, 1981, Pub. L. 97–34, title III, §301(b)(3), (6)(A), 95 Stat. 270 ; Jan. 12, 1983, Pub. L. 97–448, title I, §103(a)(2), 96 Stat. 2375 ; July 18, 1984, Pub. L. 98–369, div. A, title X, §1001(b)(7), (e), 98 Stat. 1011 , 1012; Oct. 22, 1986, Pub. L. 99–514, title VI, §612(b)(2), 100 Stat. 2250 ; Nov. 10, 1988, Pub. L. 100–647, title I, §1008(e)(5)(A), 102 Stat. 3440 .)

Amendments

1988-Subsec. (h). Pub. L. 100–647 added subsec. (h).

1986-Subsec. (c). Pub. L. 99–514, §612(b)(2)(B), substituted "1 year" for "6 months" wherever appearing in pars. (1) and (2).

Pub. L. 99–514, §612(b)(2)(A), amended subsec. (c) generally, restating subpars. (A) to (C) of former par. (1) as pars. (1) to (3) and striking out former par. (2) which read as follows: "The proportionate share of each participant in the amount of dividends or interest received by the common trust fund and to which section 116 or 128 applies shall be considered for purposes of such section as having been received by such participant."

1984-Subsec. (c)(1)(A), (B). Pub. L. 98–369 substituted "6 months" for "1 year", wherever appearing, applicable to property acquired after June 22, 1984, and before Jan. 1, 1988. See Effective Date of 1984 Amendment note below.

1983-Subsec. (c)(2). Pub. L. 97–448 reenacted par. (2) without change.

1981-Subsec. (c)(2). Pub. L. 97–34, §301(b)(6)(A), inserted reference to "interest" in heading and text, which continued the amendment made by Pub. L. 96–223.

Pub. L. 97–34, §301(b)(3), inserted "or 128" after "section 116".

1980-Subsec. (c)(2). Pub. L. 96–223 inserted "or interest" after "dividends" in heading and text.

1977-Subsec. (d)(4). Pub. L. 95–30 struck out par. (4) relating to standard deduction.

1976-Subsec. (a). Pub. L. 94–414 inserted provision relating to treatment of two or more bank members of same affiliated group.

Subsec. (a)(1). Pub. L. 94–455, §2138, designated existing provisions relating to trustee, executor, administrator and guardian as subpar. (A) and added subpar. (B).

Subsec. (c)(1)(A), (B). Pub. L. 94–455, §1402(b)(2), provided that "9 months" would be changed to "1 year" wherever appearing.

Pub. L. 94–455, §1402(b)(1)(H), provided that "6 months" would be changed to "9 months" for taxable years beginning in 1977.

Subsec. (c)(2). Pub. L. 94–455, §1901(b)(1)(G), struck out provisions relating to partially tax exempt interest and election of a common trust fund to amortize premiums on bonds and other obligations.

Subsec. (e). Pub. L. 94–455, §2131(d), inserted "The admission of a participant shall be treated with respect to the participant as the purchase of, or exchange for, the participating interest".

Subsec. (g). Pub. L. 94–455, §1906(b)(13)(A), struck out "or his delegate" after "Secretary".

1964-Subsec. (c)(2). Pub. L. 88–272 struck out "section 34 or" before "section 116 applies".

1962-Subsec. (a)(2). Pub. L. 87–722 inserted "or the Comptroller of the Currency" after "the Board of Governors of the Federal Reserve System".

Effective Date of 1988 Amendment

Section 1008(e)(5)(B) of Pub. L. 100–647 provided that: "The amendment made by subparagraph (A) [amending this section] shall take effect as if included in the amendments made by section 806 of the Reform Act [Pub. L. 99–514], except that section 806(e)(1) [set out as a note under section 1378 of this title] shall be applied by substituting 'December 31, 1987' for 'December 31, 1986'. For purposes of section 806(e)(2) of the Reform Act [set out as a note under section 1378 of this title]-

"(i) a participant in a common trust fund shall be treated in the same manner as a partner, and

"(ii) subparagraph (C) thereof shall be applied by substituting 'December 31, 1987' for 'December 31, 1986' and as if it did not contain the election to include all income in the short taxable year."

Effective Date of 1986 Amendment

Section 612(b)(2)(B) of Pub. L. 99–514 provided that: "If the amendments made by section 1001 of the Tax Reform Act of 1984 [Pub. L. 98–369, amending this section and sections 166, 341, 402, 403, 423, 582, 631, 642, 702, 818, 852, 856, 857, 1222, 1223, 1231, 1232, 1233, 1234, 1235, 1246, 1247, and 1248 of this title] cease to apply [see Effective Date of 1984 Amendment note below], effective with respect to property to which such amendments do not apply, subsection (c) of section 584 is amended by striking out '6 months' each place it appears and inserting in lieu thereof '1 year'."

Amendment by section 612(b)(2) of Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, see section 612(c) of Pub. L. 99–514, set out as a note under section 301 of this title.

Effective Date of 1984 Amendment

Amendment by Pub. L. 98–369 applicable to property acquired after June 22, 1984, and before Jan. 1, 1988, see section 1001(e) of Pub. L. 98–369, set out as a note under section 166 of this title.

Effective Date of 1983 Amendment

Amendment by Pub. L. 97–448 effective, except as otherwise provided, as if it had been included in the provision of the Economic Recovery Tax Act of 1981, Pub. L. 97–34, to which such amendment relates, see section 109 of Pub. L. 97–448, set out as a note under section 1 of this title.

Effective Date of 1981 Amendment

Amendment by section 301(b)(3) of Pub. L. 97–34 applicable to taxable years ending after Sept. 30, 1981, and amendment by section 301(b)(6)(A) of Pub. L. 97–34 applicable to taxable years beginning after Dec. 31, 1981, see section 301(d) of Pub. L. 97–34, set out as a note under section 265 of this title.

Effective and Termination Dates of 1980 Amendment

Amendment by Pub. L. 96–223 applicable with respect to taxable years beginning after Dec. 31, 1980, and before Jan. 1, 1982, see section 404(c) of Pub. L. 96–223, set out as a note under section 265 of this title.

Effective Date of 1977 Amendment

Amendment by Pub. L. 95–30 applicable to taxable years beginning after Dec. 31, 1976, see section 106(a) of Pub. L. 95–30, set out as a note under section 1 of this title.

Effective Date of 1976 Amendments

Section 2131(f)(6) of Pub. L. 94–455 provided that: "The amendments made by subsections (d) and (e) [amending this section and section 683 of this title] shall take effect on April 8, 1976, in taxable years ending on or after such date."

Section 1402(b)(1) of Pub. L. 94–455 provided that the amendment made by that section is effective with respect to taxable years beginning in 1977.

Section 1402(b)(2) of Pub. L. 94–455 provided that the amendment made by that section is effective with respect to taxable years beginning after Dec. 31, 1977.

Amendment by section 1901(b)(1)(G) of Pub. L. 94–455 applicable with respect to taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94–455, set out as an Effective Date of 1976 Amendment note under section 2 of this title.

Section 2 of Pub. L. 94–414 provided that: "The amendment made by the first section of this Act [amending this section] shall apply to taxable years beginning after December 31, 1975."

Effective Date of 1964 Amendment

Amendment by Pub. L. 88–272 applicable with respect to dividends received after Dec. 31, 1964, in taxable years ending after such date, see section 201(e) of Pub. L. 88–272, set out as a note under section 22 of this title.

Section Referred to in Other Sections

This section is referred to in sections 59, 170, 171, 581, 706, 851, 6049 of this title.