The IRS has ruled favorably (PLR 2013-05-001) on certain
redemptions by a regulated investment company (RIC).
The RIC had redeemed stock from several mutual funds that owned
stock in the RIC. The redemption of stock ordinarily is an equity
shift that may trigger an ownership change under Section 382. RICs
that redeem stock in the ordinary course of business, however, do
not have to treat such redemptions under the usual Section 382
rules. The ruling concludes that such redemptions are in the
ordinary course of business.
In addition, the ruling concluded that no two or more such
mutual funds were a single "entity" for Section 382
purposes. Under Treas. Reg. Sec. 1.382-3(a), when two or more
people act in concert or under a plan, they may be aggregated and
tracked as a single person. Presumably, without such a ruling, the
taxpayer in this case may have been concerned that such aggregation
may have had adverse Section 382 ownership-shift results.
