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trusts. A RIC formed as a separate "series" of an existing trust
is, nevertheless, treated as a separate company under the 1940
Act and treated as a separate corporation under section 851(h).4
The RIC's created during the years at issue are governed by
the trust instruments of 26 different Massachusetts business
trusts. During the years at issue, petitioner created two new
trusts for two of the RIC's created. The remaining 80 RIC's
created during the years at issue were established as separate
series within preexisting trusts.5
Since one trust may serve as the governing instrument for
many separate RIC's, the trust document provides that the assets
of the trust received for the issue or sale of shares of each RIC
and all income, earnings, profits, and proceeds are segregated
and allocated to such RIC and constitute its underlying assets.
The underlying assets of a RIC are segregated on the books of
account and are charged with the liabilities of the RIC and a
share (based upon a proportion of the RIC's asset value) of the
trust's general expenses.
4Sec. 851(h) applies to tax years beginning after Oct. 22,
1986.
5A Declaration of Trust permits the trustees to create
additional RIC's to be governed by a given trust document. The
Declaration of Trust provides that in the event that FMR Co.
ceases to act as investment adviser to the trust or RIC, the
right of the trust or RIC to use identifying names, such as
"Fidelity" or "Spartan", terminates.
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