XXXXXXXX XXXXX XXXXXXX & XXXXX, LLP
STRADLEY 0000 Xxx Xxxxxxxx Xxxxxx
XXXXX Xxxxxxxxxxxx, XX 00000-7098
---------------- Telephone 000.000.0000
ATTORNEYS AT LAW Fax 000.000.0000
xxx.xxxxxxxx.xxx
November 12, 2008
Board of Trustees
Franklin Tax-Free Trust
Xxx Xxxxxxxx Xxxxxxx
Xxx Xxxxx, XX 00000-1906
Board of Trustees
Franklin New York Tax-Free Trust
Xxx Xxxxxxxx Xxxxxxx
Xxx Xxxxx, XX 00000-1906
RE: AGREEMENT AND PLAN OF REORGANIZATION, MADE AS OF THE 10TH
DAY OF NOVEMBER, 2008 (THE "AGREEMENT"), BY FRANKLIN
TAX-FREE TRUST, A STATUTORY TRUST CREATED UNDER THE LAWS
OF THE STATE OF DELAWARE ("TRUST"), ON BEHALF OF ITS
SERIES, FRANKLIN FEDERAL LIMITED-TERM TAX-FREE INCOME
FUND ("ACQUIRING FUND"), AND FRANKLIN NEW YORK TAX-FREE
TRUST, A STATUTORY TRUST CREATED UNDER THE LAWS OF THE
STATE OF DELAWARE ("ACQUIRED TRUST"), ON BEHALF OF ITS
SERIES, FRANKLIN NEW YORK LIMITED-TERM TAX-FREE INCOME
FUND ("ACQUIRED FUND")
Gentlemen:
You have requested our opinion concerning certain federal
income tax consequences of the reorganization of Acquired Fund (the
"Reorganization"), which will consist of: (i) the acquisition by
Trust, on behalf of Acquiring Fund, of substantially all of the
property, assets and goodwill of Acquired Fund in exchange solely
for full and fractional Class A shares of beneficial interest, with
no par value, of Acquiring Fund ("Acquiring Fund Shares") which are
voting securities; (ii) the distribution of Acquiring Fund Shares
to the holders of shares of beneficial interest of Acquired Fund
(the "Acquired Fund Shares"), according to their respective
interests in Acquired Fund in complete liquidation of Acquired
Fund; and (iii) the dissolution of Acquired Fund as soon as is
practicable after the closing (the "Closing"), all upon and subject
to the terms and conditions of the Agreement.
In rendering our opinion, we have reviewed and relied
upon: (a) the Agreement, made as of the 10th day of November,
2008, by Trust, on behalf of Acquiring Fund, and by Acquired Trust,
on behalf of Acquired Fund; (b) the proxy materials provided to
shareholders of Acquired Fund in connection with a Special Meeting
of Shareholders of Acquired Fund held on October 24, 2008; (c)
certain representations concerning the Reorganization made to us by
Trust, on behalf of Acquiring Fund, and by Acquired Trust, on
behalf of Acquired Fund, in a letter dated November 12, 2008 (the
"Representation Letter"); (d) all other documents, financial and
other reports and corporate minutes we deemed relevant or
appropriate; and (e) such statutes, regulations, rulings and
decisions as we deemed material in rendering this opinion. All
terms used herein, unless otherwise defined, are used as defined in
the Agreement.
For purposes of this opinion, we have assumed that
Acquired Fund, on the Closing of the Reorganization, satisfies, and
immediately following the Closing, Acquiring Fund will continue to
satisfy, the requirements of Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"), for qualification as a
regulated investment company.
Based on the foregoing, and provided the Reorganization
is carried out in accordance with the applicable laws of the State
of Delaware, the terms of the Agreement and the statements in the
Representation Letter with regard to matters of fact, it is our
opinion that:
1. The acquisition by Acquiring Fund of substantially
all of the assets of Acquired Fund as provided for in the Agreement
in exchange solely for Acquiring Fund Shares, followed by the
distribution by Acquired Fund to its shareholders of Acquiring Fund
Shares in complete liquidation of Acquired Fund, will qualify as a
reorganization within the meaning of Section 368(a)(1) of the Code,
and Acquired Fund and Acquiring Fund each will be a "party to the
reorganization" within the meaning of Section 368(b) of the Code.
2. No gain or loss will be recognized by Acquired Fund
upon the transfer of substantially all of its assets to Acquiring
Fund in exchange solely for Acquiring Fund Shares pursuant to
Section 361(a) and Section 357(a) of the Code.
3. No gain or loss will be recognized by Acquiring Fund
upon the receipt by it of substantially all of the assets of
Acquired Fund in exchange solely for Acquiring Fund Shares pursuant
to Section 1032(a) of the Code.
4. No gain or loss will be recognized by Acquired Fund
upon the distribution of Acquiring Fund Shares to its shareholders
in complete liquidation of Acquired Fund (in pursuance of the
Agreement) pursuant to Section 361(c)(1) of the Code.
5. The basis of the assets of Acquired Fund received by
Acquiring Fund will be the same as the basis of these assets to
Acquired Fund immediately prior to the exchange pursuant to Section
362(b) of the Code.
6. The holding period of the assets of Acquired Fund
received by Acquiring Fund will include the period during which
such assets were held by Acquired Fund pursuant to Section 1223(2)
of the Code.
7. No gain or loss will be recognized by the
shareholders of Acquired Fund upon the exchange of their Acquired
Fund Shares for Acquiring Fund Shares (including fractional shares
to which they may be entitled), pursuant to Section 354(a) of the
Code.
8. The basis of Acquiring Fund Shares received by the
shareholders of Acquired Fund (including fractional shares to which
they may be entitled) will be the same as the basis of Acquired
Fund Shares exchanged therefor pursuant to Section 358(a)(1) of the
Code.
9. The holding period of Acquiring Fund Shares received
by the shareholders of Acquired Fund (including fractional shares
to which they may be entitled) will include the holding period of
Acquired Fund Shares surrendered in exchange therefor, provided
that Acquired Fund Shares were held as a capital asset on the
Closing of the Reorganization pursuant to Section 1223(1) of the
Code.
10. Acquiring Fund will succeed to and take into
account, as of the date of the transfer as defined in Section
1.381(b)-1(b) of the income tax regulations issued by the United
States Department of the Treasury (the "Treasury Regulations"), the
items of Acquired Fund described in Section 381(c) of the Code,
subject to the conditions and limitations specified in Sections
381, 382, 383 and 384 of the Code and the Treasury Regulations.
Our opinion is based upon the Code, the applicable
Treasury Regulations, the present positions of the Internal Revenue
Service (the "Service") as are set forth in published revenue
rulings and revenue procedures, present administrative positions of
the Service, and existing judicial decisions, all of which are
subject to change either prospectively or retroactively. We do not
undertake to make any continuing analysis of the facts or relevant
law following the Closing of the Reorganization.
Our opinion is conditioned upon the performance by Trust,
on behalf of Acquiring Fund, and Acquired Trust, on behalf of
Acquired Fund, of their undertakings in the Agreement and the
Representation Letter. Our opinion is limited to the transactions
incident to the Reorganization described herein, and no opinion is
rendered with respect to (i) any other transaction or (ii) the
effect, if any, of the Reorganization (and/or the transactions
incident thereto) on any other transaction and/or the effect, if
any, of any such other transaction on the Reorganization.
This opinion is being rendered to Trust, on behalf of
Acquiring Fund, and Acquired Trust, on behalf of Acquired Fund, and
may be relied upon only by such funds and the shareholders of each.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement of Acquiring Fund on Form N-14, and any
amendments thereto, covering the registration of Acquiring Fund
Shares under the Securities Act of 1933, as amended, to be issued
in the Reorganization.
Very truly yours,
/s/ XXXXXXXX XXXXX XXXXXXX & XXXXX, LLP
