Contents

POOLED INCOME FUNDSConcurrently with the publication of this prototype of a qualifying pooledincome fund, the IRS announced that it ordinarily would no longer issue rulingsas to whether a transfer to a pooled income fund qualifies for a charitablededuction or whether a pooled income fund is a qualified one. 62 Those who followthese sample provisions are assured that the IRS will recognize the fund asmeeting the pooled income fund requirements, as long as the fund operates in amanner consistent with the terms of the trust instrument and is a valid trustunder local law. The sample provisions are not intended, however, to precludeother permissible provisions in the governing instrument. Provisions that varyfrom the prototype language will not adversely affect the qualification of a fundas a pooled income fund if the provisions are consistent with the legal requirementsapplicable to pooled income funds. Consequently, despite this generalnon-ruling policy, when a pooled income fund document contains provisionsthat differ from the sample provisions, the IRS will rule as to whether the differingprovisions disqualify the trust. 63The following provisions have been held not to adversely affect the qualificationof a fund as a pooled income fund:• A requirement that donors impose an obligation on their estates to paydeath taxes from sources other than the pooled income fund• A provision enabling a donor to retain either a primary or a secondaryincome interest in a “two lives consecutively” form of arrangement 64• The trustee is authorized to invest in any kind of property, other thansecurities that produce tax-exempt income, interests in real estate investmenttrusts, depreciable real or personal property, depletable assets, orproperty that would in any way result in denial of any charitable contributiondeduction to which donors to the fund may otherwise be entitled• In computing the fair market value of the fund’s assets, all accrued assetsand liabilities will be taken into account; the amount of any incomeearned by the fund but not yet distributed on a distribution date will beexcluded from the fund’s fair market value• The following items must be allocated to principal: gains from the sale,exchange, redemption, or other distribution of any investment; stock dividends;capital gain dividends of regulated investment companies; liquidatingdistributions; amounts received from the sale of options that arenot exercised by the optionee; and any other dividends or distributionsnot deemed taxable as income under the federal tax law 65The IRS also published additional pooled income fund language concerningthe establishment of depreciation reserve funds. 6662 Rev. Proc. 88-54, 1988-2 C.B. 715, amplifying Rev. Proc. 88-3, 1988-1 C.B. 579. This announcement appliedto all ruling requests received in the National Office of the IRS after November 28, 1988. This non-ruling positionof the IRS is also reflected in Rev. Proc. 2004-3, 2004-1 I.R.B. 2004, § 4.01 (14), (37), (42), (44). Priorto that time, the IRS issued rulings as to the qualification of pooled income funds (e.g., Priv. Ltr. Rul. 8601041).63 See, e.g., Priv. Ltr. Rul. 9311018.64 Priv. Ltr. Rul. 9412004.65 Priv. Ltr. Rul. 9642037.66 Rev. Rul. 90-103, 1990-2 C.B. 159. 488