EXHIBIT 3.2
XXXXXXX AND XXXXXX
000 XXXX XXXXXX XXXXXX
XXXXXXX, XXXXXXXX 00000
April 9, 1998
Xxx Xxxxxx American Capital Distributors, Inc.
Xxx Xxxxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000
The Bank of New York
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Re: XXX XXXXXX AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST, SERIES 91
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Gentlemen:
We have acted as counsel for Xxx Xxxxxx American Capital Distributors,
Inc., Depositor of Xxx Xxxxxx American Capital Equity Opportunity Trust, Series
91 (the "Fund"), in connection with the issuance of Units of fractional
undivided interest in the Fund, under a Trust Agreement dated April 9, 1998 (the
"Indenture") among Xxx Xxxxxx American Capital Distributors, Inc., as Depositor,
Xxx Xxxxxx American Capital Investment Advisory Corp., as Evaluator, Xxx Xxxxxx
American Capital Investment Advisory Corp., as Supervisory Servicer, and The
Bank of New York, as Trustee. The Fund is comprised of the following separate
unit investment trusts described in the prospectus for the Fund (the "Trusts").
In this connection, we have examined the Registration Statement, the
Prospectus, the Indenture, and such other instruments and documents as we have
deemed pertinent.
The assets of each Trust will consist of a portfolio of securities (the
"Securities") as set forth in the Prospectus. For purposes of this opinion, it
is assumed that each Security is equity for federal income tax purposes.
Based upon the foregoing and upon an investigation of such matters of
law as we consider to be applicable, we are of the opinion that, under existing
United States Federal income tax law:
(i) Each Trust is not an association taxable as a corporation
for Federal income tax purposes but will be governed by the provisions
of subchapter J (relating to trusts) of chapter 1, Internal Revenue
Code of 1986 (the "Code").
(ii) A Unitholder will be considered as owning a pro rata
share of each asset of a Trust in the proportion that the number of
Units held by him bears to the total number of Units outstanding. Under
subpart E, subchapter J of chapter 1 of the Code, income of a Trust
will be treated as income of each Unitholder in the proportion
described, and an item of Trust income will have the same character in
the hands of a Unitholder as it would have in the hands of the Trustee.
Each Unitholder will be considered to have received his pro rata share
of income derived from each Trust asset when such income is considered
to be received by a Trust. A Unitholder's pro rata portion of
distributions of cash or property by a corporation with respect to a
Security ("dividends" as defined by Section 316 of the Code) is taxable
as ordinary income to the extent of such corporation's current and
accumulated "earnings and profits." A Unitholder's pro rata portion of
dividends which exceeds such current and accumulated earnings and
profits will first reduce the Unitholder's tax basis in such Security,
and to the extent that such dividends exceed a Unitholder's tax basis
in such Security, shall be treated as gain from the sale or exchange of
property.
(iii) The price a Unitholder pays for his Units, generally
including sales charges, is allocated among his pro rata portion of
each Security held by a Trust (in proportion to the fair market values
thereof on the valuation date closest to the date the Unitholder
purchases his Units), in order to determine his tax basis for his pro
rata portion of each Security held by a Trust.
(iv) Gain or loss will be recognized to a Unitholder (subject
to various nonrecognition provisions under the Code) upon redemption or
sale of his Units, except to the extent an in kind distribution of
stock is received by such Unitholder from a Trust as discussed below.
Such gain or loss is measured by comparing the proceeds of such
redemption or sale with the adjusted basis of his Units. Before
adjustment, such basis would normally be cost if the Unitholder had
acquired his Units by purchase. Such basis will be reduced, but not
below zero, by the Unitholder's pro rata portion of dividends with
respect to each Security which are not taxable as ordinary income.
(v) If the Trustee disposes of a Trust asset (whether by
sale, exchange, liquidation, redemption, payment on maturity or
otherwise) gain or loss will be recognized to the Unitholder (subject
to various nonrecognition provisions under the Code) and the amount
thereof will be measured by comparing the Unitholder's aliquot share of
the total proceeds from the transaction with his basis for his
fractional interest in the asset disposed of. Such basis is ascertained
by apportioning the tax basis for his Units (as of the date on which
his Units were acquired) among each of the Trust assets (as of the date
on which his Units were acquired) ratably according to their values as
of the valuation date nearest the date on which he purchased such
Units. A Unitholder's basis in his Units and of his fractional interest
in each Trust asset must be reduced, but not below zero, by the
Unitholder's pro rata portion of dividends with respect to each
Security which are not taxable as ordinary income.
(vi) Under the Indenture, under certain circumstances, a
Unitholder tendering Units for redemption may request an in kind
distribution of U.S. traded Securities upon the redemption of Units or
upon the termination of a Trust. A Unitholder will receive cash
representing his pro rata portion of the foreign Securities in such a
Trust. As previously discussed, prior to the redemption of Units or the
termination of a Trust, a Unitholder is considered as owning a pro rata
portion of each of the particular Trust's assets. The receipt of an in
kind distribution will result in a Unitholder receiving an undivided
interest in whole shares of stock and possibly cash. The potential
federal income tax consequences which may occur under an in kind
distribution with respect to each Security owned by a Trust will depend
upon whether or not a Unitholder receives cash in addition to
Securities. A "Security" for this purpose is a particular class of
stock issued by a particular corporation. A Unitholder will not
recognize gain or loss if a Unitholder only receives Securities in
exchange for his or her pro rata portion of the Securities held by the
Trust. However, if a Unitholder also receives cash in exchange for a
fractional share of a U.S. traded Security or for a foreign Security
held by a Trust, such Unitholder will generally recognize gain or loss
based upon the difference between the amount of cash received by the
Unitholder and his tax basis in such fractional share of a U.S. traded
Security or such foreign Security held by such Trust. The total amount
of taxable gains (or losses) recognized upon such redemption will
generally equal the sum of the gain (or loss) recognized under the
rules described above by the redeeming Unitholder with respect to each
Security owned by a Trust.
A domestic corporation owning Units in a Trust may be eligible for the
70% dividends received deduction pursuant to Section 243(a) of the Code with
respect to such Unitholder's pro rata portion of dividends received by a Trust
(to the extent such dividends are taxable as ordinary income and are
attributable to domestic corporations), subject to the limitations imposed by
Sections 246 and 246A of the Code.
To the extent dividends received by a Trust are attributable to foreign
corporations, a corporation that owns Units will not be entitled to the
dividends received deduction with respect to its pro rata portion of such
dividends since the dividends received deduction is generally available only
with respect to dividends paid by domestic corporations.
Section 67 of the Code provides that certain itemized deductions, such
as investment expenses, tax return preparation fees and employee business
expenses will be deductible by individuals only to the extent they exceed 2% of
such individual's adjusted gross income. Unitholders may be required to treat
some or all of the expenses of a Trust as miscellaneous itemized deductions
subject to this limitation.
A Unitholder will recognize taxable gain (or loss) when all or part of
the pro rata interest in a Security is either sold by a Trust or redeemed or
when a Unitholder disposes of his Units in a taxable transaction, in each case
for an amount greater (or less) than his tax basis therefor, subject to various
non-recognition provisions of the Code.
It should be noted that payments to a Trust of dividends on Securities
that are attributable to foreign corporations may be subject to foreign
withholding taxes and Unitholders should consult their tax advisers regarding
the potential tax consequences relating to the payment of any such withholding
taxes by the Trust. Any dividends withheld as a result thereof will nevertheless
be treated as income to the Unitholders. Because under the grantor trust rules,
an investor is deemed to have paid directly his share of foreign taxes that have
been paid or accrued, if any, an investor may be entitled to a foreign tax
credit or deduction for United States tax purposes with respect to such taxes. A
required holding period is imposed for such credits.
Any gain or loss recognized on a sale or exchange will, under current
law, generally be capital gain or loss.
The scope of this opinion is expressly limited to the matters set forth
herein, and, except as expressly set forth above, we express no opinion with
respect to any other taxes, including foreign, state or local taxes or
collateral tax consequences with respect to the purchase, ownership and
disposition of Units.
Very truly yours,
XXXXXXX AND XXXXXX
