FROM THE OFFICE OF PUBLIC AFFAIRS
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May 6, 2004
JS-1517
Treasury Issues Guidance On Mutual Funds
The Treasury Department and the Internal Revenue Service today issued guidance making available to mutual funds a simplifying assumption that is already available under the securities law.
“Applying the same, common-sense rule for both securities law and tax purposes will simplify compliance for mutual funds,” said Acting Assistant Secretary for Tax Policy Gregory F. Jenner.
Mutual funds often invest excess cash on a short-term basis by entering repurchase or “repo” transactions in which the fund simultaneously buys a Treasury security and agrees to resell the security to the same person for a pre-arranged amount. In determining whether a fund satisfies the statutory diversification test, the fund’s managers may now treat an investment in a repo of a Treasury security as if the investment were itself a Government security. Since August 2001, the SEC’s Rule 5b–3 under the Investment Company Act of 1940 has permitted similar treatment.
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