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 California 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
CALIFORNIA TAX-FREE TRUST, A STATUTORY TRUST CREATED
UNDER THE LAWS OF THE STATE OF DELAWARE ("ACQUIRED
TRUST"), ON BEHALF OF ITS SERIES, FRANKLIN CALIFORNIA
LIMITED-TERM TAX-FREE INCOME FUND ("ACQUIRED FUND")
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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
