FIXED INVESTMENT TRUST CLASSIFIED.

UIL Number(s) 7701.03-05

                                             Date: October 31, 1986

This is in reply to a letter dated October 15, 1986, and other correspondence, submitted on behalf of X by its authorized representatives. In this correspondence, a ruling is requested under section 301.7701-4(c) of the Procedure and Administration Regulations.

X, a corporation, is the co-sponsor of various Trusts. These Trusts are funded with fixed portfolios of different issues of tax- exempt debt obligations and with contracts for the purchase of these obligations. Undivided interests in the Trusts are evidenced by Certificates.

Many of the debt obligations contained in the Trusts are payable only from the revenues derived from a specific facility pursuant to a loan agreement, conditional sale agreement or lease between the issuer of the debt obligation and the corporate user of the facility. In most cases, because the credit of the corporate user or obligor is insufficient, an additional form of credit support is utilized to enhance the marketability of the debt obligation. A debt obligation may be secured by a letter of credit, guaranty or insurance policy. In some instances, the guaranty or letter of credit is itself accrued by a pledge of collateral.

From time to time, the Trustee or sponsors of a Trust are approached by the issuer or corporate obligor of a debt obligation with a request to consent to a change in the credit support for the obligation. The requested change may be in the identity of the obligor on the credit support or in the type of credit support. Alternatively, the change may be in the type of collateral used to secure an existing collateralized letter of credit or guaranty.

Each Trust co-sponsored by X is governed by a separate trust indenture. That indenture incorporates the provisions of a Master Trust Agreement by reference. (X has submitted a copy of the indenture creating Trust A and a copy of the Master Trust Agreement). In order to accommodate requests to consent to changes in credit supports, it is now proposed that the Master Trust Agreement be amended to include the following:

3.15(a). POWER OF TRUSTEE TO CONSENT TO CHANGE IN CREDIT SUPPORT. The Trustee may, upon receipt of instructions given by the Sponsors following receipt of a request from the issuer of a Debt Obligation or the owner of the project whose earnings service a Debt Obligation, take any action it shall deem advisable to consent to a change in the letter of credit, guaranty or insurance policy securing payments by the issuer of any Debt Obligation ("Credit Support"), including without limitation a change from one form of Credit Support to another, a change in the identity of the obligor on the Credit Support or a change in the type of collateral which may be pledged to secure a collateralized Credit Support obligation or in any other term or requirement of the collateral arrangement, provided that the Credit Support as changed is rated by at least one national rating agency in the same or better category as the existing Credit Support at the time of the change or has, in the opinion of the Sponsors, comparable or better credit characteristics.

(b) No action taken under clause (a) of this Section 3.15 shall constitute an event under Section 3.07 hereof which authorizes the Sponsors to direct the Trustee to sell Debt Obligations.

As mentioned above, the funding of a Trust may include contracts for the purchase of tax-exempt debt obligations. It is now proposed that the provisions of Master Trust Agreement concerning these contracts be amended to read as follows:

3.08(b) REPLACEMENT DEBT OBLIGATIONS. In the event that any contract to purchase Debt Obligations is declared by the Sponsors to have failed, due to reasons beyond the control of the Sponsor or Trustee, within 90 days following the Date of Deposit of the contract into the Trust Fund ("Failed Debt Obligations") the Sponsors may instruct the Trustee to purchase, with funds held by the Trustee for the purchase of such Failed Debt Obligations, replacement Debt Obligations which have been selected by the Sponsors ("Replacement Debt Obligations") in an aggregate principal amount not to exceed such principal amount of the Failed Debt Obligations. The aggregate purchase price of the Replacement Debt Obligations shall not exceed the amount of funds, including accrued interest, held specially for the purchase of such Failed Debt Obligations. The Trustee shall have no duty or responsibility with respect to the selection of Replacement Debt Obligations and the selection by the Sponsors of securities as Replacement Debt Obligations shall be deemed to be their certification that such Replacement Debt obligations comply with this Section 3.08(b). To be eligible for inclusion in the Trust Fund, the Replacement Debt Obligations which the Sponsors select must: (i) be tax exempt bonds issued by states, territories or their political subdivisions; (ii) have a fixed maturity or disposition date substantially the same as that of the Failed Debt Obligations; (iii) be deposited with the Trustee at a price that results in a yield to maturity and in a current return, in each case as of the date on which such Replacement Debt Obligations are deposited with the Trustee, which are equivalent (taking into consideration then current market conditions and the relative credit-worthiness of the underlying obligations) to the yield to maturity and current return of the Failed Debt Obligations; (iv) be deposited with the Trustee within 110 days of the Date of Deposit [i.e., the date of creation of the Trust Fund] of the Failed Debt Obligation into the Trust Fund; (v) be rated in the category A or better by at least one of two national rating organizations or have, in the opinion of the Sponsors, comparable credit characteristics; and (vi) not be a when, as and if issued debt obligation. Any Replacement Debt Obligations received by the Trustee shall be deposited hereunder and shall be subject to the terms and conditions of this Indenture to the same extent as the Debt Obligations originally deposited hereunder. Within five days after such replacement and deposit, written notice thereof shall be given by the Trustee, as agent for the Sponsors, to each Holder, including an identification of the Failed Debt Obligations and the Replacement Debt Obligations substituted therefore. Any funds held in respect of Failed Debt Obligations for which an instruction to purchase Replacement Debt Obligations has not been given and which remain in the Trust Fund after the period specified in clause (iv) above shall be distributed at the time and in the manner specified in Section 3.04 regarding failed contracts in respect of which no Replacement Debt Obligations are to be substituted.

The Master Trust Agreement will also be amended to provide that all Debt Obligations to be transferred pursuant to contracts to purchase Debt Obligations must be transferred to the Trust Fund within 110 days of the date of creation of the Trust Fund.

Based on the information submitted, our rationale and conclusions are as follows:

Section 301.7701-4(c) of the regulations provides, in part, that an "investment" trust will not be classified as a trust if there is a power under the trust agreement to vary the investment of the certificate holders. See, Commissioner v. North American Bond Trust, 122 F.2d 545 (2d Cir. 1941), cert. denied, 314 U.S. 701 (1942). An investment trust with a single class of ownership interests, representing undivided beneficial interests in the assets of the trust, will be classified as a trust if there is no power under the trust agreement to vary the investment of the certificate holders.

In North American Bond Trust, the court held that a power to acquire new bonds upon the admission of new investors, where existing investors would acquire a pro rata interest in the new bonds, was a power to vary the investment of the existing investors. The power allowed the "depositor" to take advantage of market variations in a manner that could improve the investments of the original investors.

In Rev. Rul. 73-460, 1973-2 C.B. 424, the depositor of a fixed investment trust was empowered to direct the trustee to accept a refinancing offer, made by the obligor of obligations held by the trust, to issue new obligations in exchange and substitution for existing obligations. The depositor's discretionary power was exercisable only if (1) the issuer was in default with respect to such obligations, or (2) in the opinion of the depositor, the issuer would probably default with respect to such bonds in the reasonably foreseeable future. It was held that the trustee's power was not a "power to vary the investment of the certificate holders" within the meaning of section 301.7701-4(c) of the regulations.

The trustee's power to consent to changes in the credit support for debt obligations held by a Trust (as described in proposed section 3.15 of Master Trust Agreement) is not a power to vary the investment of Certificate Holders of the Trust within the meaning of section 301.7701-4(c) of the regulations. The power is not the type of managerial power discussed in North American Bond Trust that would allow Trustee to take advantage of market variations with a view toward improving the investments of Certificate Holders. The power is more akin to that described in Rev. Rul. 73-460, since its primary purpose is to accommodate the economic needs of the obligor with a view toward preserving and protecting Certificate Holders' investments. In fact, the exercise of the power described in the proposed amendment is even less likely to vary the investment of Certificate Holders than is the exercise of the power described in Rev. Rul. 73-460, because, unlike the situation in Rev. Rul. 73-460, the power described in the proposed amendment does not allow Trustee to consent to any changes in the yield or maturity date of debt obligations held by a Trust.

Similarly, the power to replace failed debt obligations (as described in section 3.08(b), as amended, of Master Trust Agreement) will not be considered a power to vary the investment of Certificate holders of Trusts within the meaning of section 301.7701-4(c) of the regulations. See, Rev. Rul. 86-92, 1986-30 I.R.B. 5.

Accordingly, based on the information submitted in connection with this ruling request, we conclude that Trust A will be classified as a fixed investment trust from the date of this ruling letter under section 301.7701-4(c) of the regulations. In addition, other Trusts to be formed under Master Trust Agreement within one year from the date of this ruling letter will be classified as fixed investment trusts under section 301.7701-4(c), provided the separate standard trust indenture creating each Trust has terms that are substantially identical to the terms of the separate indenture that established Trust A.

Except as specifically ruled on above, no opinion is expressed with respect to any other provision of the Internal Revenue Code.

In accordance with the power of attorney of file, we are sending a copy of this letter to your authorized representative.

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

                                   Sincerely yours,