KRS 286.3-235: Common trust fund not separate entity for tax purposes --

Circumstances when no gain or loss to be recognized.

(1) Common trust funds shall not be considered as an entity for income or other tax

purposes, nor shall investment in such fund make taxab le any property which is

otherwise exempt therefrom; and for purposes of taxation, the status of the common

trust fund and of each participant therein shall be determined as though there were

no common fund and as though each participant was the owner of i ts proportionate

share of every asset held in the common fund. The bank or trust company

maintaining said fund shall file a report of said fund with the property valuation

administrator as of the ad valorem tax date and shall file annually such income tax

information as may be required by the Department of Revenue.

(2) Notwithstanding subsection (1) of this section, if a common trust fund transfers

substantially all of its assets to one (1) or more regulated investment companies in

exchange solely for stock in the company or companies to which such assets are

transferred and such stock is distributed by such common trust fund to the

participants in such common trust fund in a transaction which would qualify under

Section 584(h) of the Internal Revenue Code o f 1986, as amended, for the

nonrecognition of gain or loss of such transfer or distribution by the common trust

fund, then no gain or loss shall be recognized for Kentucky income tax purposes by

the common trust fund by reason of such transfer or distribut ion or by the

participants in such common trust fund by reason of such exchange.