Foreign superannuation fund is classified as a trust

Plain-English summary

A foreign arrangement was established to provide retirement benefits to its members and beneficiaries. Trustees managed employer and employee contributions and investment income, with duties to protect and conserve the fund, provide annual information, and arrange audits. Members could not unilaterally transfer their benefits or share responsibility for managing the property as a business venture. The IRS ruled that the arrangement was a trust for federal tax purposes under Treasury Regulation section 301.7701-4(a), without deciding any treaty or other tax benefits.

Ruling snapshot

• Question: Was the foreign superannuation arrangement classified as a trust for federal tax purposes?
• Outcome: Approved
• Key authorities: Treas. Reg. §§ 301.7701-1(b), 301.7701-4(a)

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201538006
Third Party Communication: None
Release Date: 9/18/2015
Date of Communication: Not Applicable
Index Number: 7701.03-08
Person To Contact:
----------------------------------------------- ---------------------, ID No. ----------------
----------------------------------------------------------- Telephone Number:
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---------------------------------------------- Refer Reply To:
CC:PSI:B01
PLR-124608-14
Date:
June 11, 2015

Legend

X = -----------------------------------------------------------
-----------------------------------------

Country = -----------

Act A = --------------------------------------------------------------

Act B = ---------------------------------------------------------------

Act C = -------------------------------------------------------------------------

Act D = -----------------------------------------------------------------

Act E = ------------------------------------------------------------------

Act F = ------------------------------------------------------------------------

Body A = -------------------------------------------------------

Body B = -------------------------------------------------------------------

Body C = ---------------------------

Body D = ------------------------------------------------

Y = -------------------

n = --

PLR-124608-14
2

Dear ----------------------:

This responds to a letter dated June 16, 2014, and subsequent correspondence, submitted on behalf of X, requesting a ruling that X is classified as a trust for federal income tax purposes under § 301.7701-4 of the Procedure and Administration Regulations of the Internal Revenue Code.

FACTS

The information submitted states that X was established under Act A and is treated as a trust under the laws of Country. X was created to provide superannuation benefits to members of X in Country.

X is governed primarily by Act A, Act B, Act C, Act D, Act E, and Act F. X is regulated by several government bodies, including Body A, Body B, Body C, and Body D. X is managed by Y, which is made up of n trustees. The organizing documents of X provide that the sole purpose of X is to provide superannuation benefits to members of X and their beneficiaries.

X derives its funds from a combination of employer contributions, employee contributions, and income from investments. Under the provisions of the organizing documents, Y is obligated to manage the funds of X responsibly in order to protect and conserve the superannuation fund. Y must also provide annually a statement setting forth information of X as required by law. X is subject to annual audit by an approved auditor appointed by Y. The members of X cannot unilaterally assign or transfer their benefits under X to another person.

LAW AND ANALYSIS

Section 301.7701-1(b) provides that the classification of organizations that are recognized as separate entities is determined under §§ 301.7701-2, 301-7701-3, and 301.7701-4 unless a provision of the Code provides for special treatment of that organization.

Section 301.7701-4(a) provides that, in general, an arrangement will be treated as a trust if it can be shown that the purpose of the arrangement is to vest in trustees responsibility for the protection and conservation of property for beneficiaries who cannot share in the discharge of this responsibility and, therefore, are not associates in joint enterprise for the conduct of business for profit. If an entity has both associates and a business purpose, it cannot be classified as a trust for federal income tax purposes.

PLR-124608-14
3

CONCLUSION

Based solely on facts submitted and representations made, we conclude that X is classified as a trust for federal income tax purposes under § 301.7701-4(a).

Except as expressly provided herein, no opinion is expressed or implied concerning the federal income tax consequences of the facts above under any other provision of the Code. Specifically, we make no determination concerning whether X or its beneficiaries are entitled to any benefits under the Code or under the income tax treaty entered into by Country and the United States concerning income derived from the United States.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.

In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to your authorized representatives.

Sincerely,

Faith P. Colson
Faith P. Colson
Senior Counsel, Branch 1
(Passthroughs & Special Industries)

Enclosures (2)
Copy of this letter
Copy for § 6110 purposes

cc: