US Code

Public Law 119-73 (01/23/2026)

26 U.S.C. § 584

Common trust funds

(a)

Definitions

For purposes of this subtitle, the term “common trust fund” means a fund maintained by a bank—
(1)
exclusively for the collective investment and reinvestment of moneys contributed thereto by the bank in its capacity—
(A)
as a trustee, executor, administrator, or guardian, or
(B)
as a custodian of accounts—
(i)
which the Secretary determines are established pursuant to a State law which is substantially similar to the Uniform Gifts to Minors Act as published by the American Law Institute, and
(ii)
with respect to which the bank establishes, to the satisfaction of the Secretary, that it has duties and responsibilities similar to duties and responsibilities of a trustee or guardian; and
(2)
in conformity with the rules and regulations, prevailing from time to time, of the Board of Governors of the Federal Reserve System or the Comptroller of the Currency pertaining to the collective investment of trust funds by national banks.
For purposes of this subsection, two or more banks which are members of the same affiliated group (within the meaning of section 1504) shall be treated as one bank for the period of affiliation with respect to any fund of which any of the member banks is trustee or two or more of the member banks are cotrustees.
(b)

Taxation of common trust funds

A common trust fund shall not be subject to taxation under this chapter and for purposes of this chapter shall not be considered a corporation.

(c)

Income of participants in fund

Each participant in the common trust fund in computing its taxable income shall include, whether or not distributed and whether or not distributable—
(1)
as part of its gains and losses from sales or exchanges of capital assets held for not more than 1 year, its proportionate share of the gains and losses of the common trust fund from sales or exchanges of capital assets held for not more than 1 year,
(2)
as part of its gains and losses from sales or exchanges of capital assets held for more than 1 year, its proportionate share of the gains and losses of the common trust fund from sales or exchanges of capital assets held for more than 1 year, and
(3)
its proportionate share of the ordinary taxable income or the ordinary net loss of the common trust fund, computed as provided in subsection (d).
The proportionate share of each participant in the amount of dividends received by the common trust fund and to which section 1(h)(11) applies shall be considered for purposes of such paragraph as having been received by such participant.
(d)

Computation of common trust fund income

The taxable income of a common trust fund shall be computed in the same manner and on the same basis as in the case of an individual, except that—
(1)
there shall be segregated the gains and losses from sales or exchanges of capital assets;
(2)
after excluding all items of gain and loss from sales or exchanges of capital assets, there shall be computed—
(A)
an ordinary taxable income which shall consist of the excess of the gross income over deductions; or
(B)
an ordinary net loss which shall consist of the excess of the deductions over the gross income; and
(3)
the deduction provided by section 170 (relating to charitable, etc., contributions and gifts) shall not be allowed.
(e)

Admission and withdrawal

No gain or loss shall be realized by the common trust fund by the admission or withdrawal of a participant. The admission of a participant shall be treated with respect to the participant as the purchase of, or an exchange for, the participating interest. The withdrawal of any participating interest by a participant shall be treated as a sale or exchange of such interest by the participant.

(f)

Different taxable years of common trust fund and participant

If the taxable year of the common trust fund is different from that of a participant, the inclusions with respect to the taxable income of the common trust fund, in computing the taxable income of the participant for its taxable year, shall be based upon the taxable income of the common trust fund for any taxable year of the common trust fund ending within or with the taxable year of the participant.

(g)

Net operating loss deduction

The benefit of the deduction for net operating losses provided by section 172 shall not be allowed to a common trust fund, but shall be allowed to the participants in the common trust fund under regulations prescribed by the Secretary.

(h)

Nonrecognition treatment for certain transfers to regulated investment companies

(1)

In general

If—
(A)
a common trust fund transfers substantially all of its assets to one or more regulated investment companies in exchange solely for stock in the company or companies to which such assets are so transferred, and
(B)
such stock is distributed by such common trust fund to participants in such common trust fund in exchange solely for their interests in such common trust fund,
no gain or loss shall be recognized by such common trust fund by reason of such transfer or distribution, and no gain or loss shall be recognized by any participant in such common trust fund by reason of such exchange.
(2)

Basis rules

(A)

Regulated investment company

The basis of any asset received by a regulated investment company in a transfer referred to in paragraph (1)(A) shall be the same as it would be in the hands of the common trust fund.

(B)

Participants

The basis of the stock which is received in an exchange referred to in paragraph (1)(B) shall be the same as that of the property exchanged. If stock in more than one regulated investment company is received in such exchange, the basis determined under the preceding sentence shall be allocated among the stock in each such company on the basis of respective fair market values.

(3)

Treatment of assumptions of liability

(A)

In general

In determining whether the transfer referred to in paragraph (1)(A) is in exchange solely for stock in one or more regulated investment companies, the assumption by any such company of a liability of the common trust fund shall be disregarded.

(B)

Special rule where assumed liabilities exceed basis

(i)

In general

If, in any transfer referred to in paragraph (1)(A), the assumed liabilities exceed the aggregate adjusted bases (in the hands of the common trust fund) of the assets transferred to the regulated investment company or companies—
(I)
notwithstanding paragraph (1), gain shall be recognized to the common trust fund on such transfer in an amount equal to such excess,
(II)
the basis of the assets received by the regulated investment company or companies in such transfer shall be increased by the amount so recognized, and
(III)
any adjustment to the basis of a participant’s interest in the common trust fund as a result of the gain so recognized shall be treated as occurring immediately before the exchange referred to in paragraph (1)(B).
 If the transfer referred to in paragraph (1)(A) is to two or more regulated investment companies, the basis increase under subclause (II) shall be allocated among such companies on the basis of the respective fair market values of the assets received by each of such companies.
(ii)

Assumed liabilities

For purposes of clause (i), the term “assumed liabilities” means any liability of the common trust fund assumed by any regulated investment company in connection with the transfer referred to in paragraph (1)(A).

(C)

Assumption

For purposes of this paragraph, in determining the amount of any liability assumed, the rules of section 357(d) shall apply.

(4)

Common trust fund must meet diversification rules

This subsection shall not apply to any common trust fund which would not meet the requirements of section 368(a)(2)(F)(ii) if it were a corporation. For purposes of the preceding sentence, Government securities shall not be treated as securities of an issuer in applying the 25-percent and 50-percent test and such securities shall not be excluded for purposes of determining total assets under clause (iv) of section 368(a)(2)(F).

(i)

Taxable year of common trust fund

For purposes of this subtitle, the taxable year of any common trust fund shall be the calendar year.

Aug. 16, 1954, ch. 73668A Stat. 203Pub. L. 87–722, § 476 Stat. 670Pub. L. 88–272, title II, § 201(d)(5)78 Stat. 32Pub. L. 94–414, § 190 Stat. 1273Pub. L. 94–455, title XIV, § 1402(b)(1)(H)90 Stat. 1732Pub. L. 95–30, title I, § 101(d)(7)91 Stat. 133Pub. L. 96–223, title IV, § 404(b)(3)94 Stat. 306Pub. L. 97–34, title III, § 301(b)(3)95 Stat. 270Pub. L. 97–448, title I, § 103(a)(2)96 Stat. 2375Pub. L. 98–369, div. A, title X, § 1001(b)(7)98 Stat. 1011Pub. L. 99–514, title VI, § 612(b)(2)100 Stat. 2250Pub. L. 100–647, title I, § 1008(e)(5)(A)102 Stat. 3440Pub. L. 104–188, title I, § 1805(a)110 Stat. 1894Pub. L. 106–36, title III, § 3001(c)(1)113 Stat. 183Pub. L. 108–27, title III, § 302(e)(7)117 Stat. 764(, ; , , ; , , ; , , ; , (2), title XIX, §§ 1901(b)(1)(G), 1906(b)(13)(A), title XXI, §§ 2131(d), 2138, , , 1790, 1834, 1924, 1932; , , ; , , ; , (6)(A), , ; , , ; , (e), , , 1012; , , ; , , ; , , ; , , ; , , .)

Editorial Notes

Amendments

Pub. L. 108–272003—Subsec. (c). inserted concluding provisions.

Pub. L. 106–36, § 3001(c)(1)(A)1999—Subsec. (h)(3)(A). , struck out “, and the fact that any property transferred by the common trust fund is subject to a liability,” before “shall be disregarded”.

Pub. L. 106–36, § 3001(c)(1)(B)Subsec. (h)(3)(B)(ii). , added cl. (ii) and struck out heading and text of former cl. (ii). Text read as follows: “For purposes of clause (i), the term ‘assumed liabilities’ means the aggregate of—

“(I) any liability of the common trust fund assumed by any regulated investment company in connection with the transfer referred to in paragraph (1)(A), and

“(II) any liability to which property so transferred is subject.”

Pub. L. 106–36, § 3001(c)(1)(B)Subsec. (h)(3)(C). , added subpar. (C).

Pub. L. 104–1881996—Subsecs. (h), (i). added subsec. (h) and redesignated former subsec. (h) as (i).

Pub. L. 100–6471988—Subsec. (h). added subsec. (h).

Pub. L. 99–514, § 612(b)(2)(B)1986—Subsec. (c). , substituted “1 year” for “6 months” wherever appearing in pars. (1) and (2).

Pub. L. 99–514, § 612(b)(2)(A), amended subsec. (c) generally, restating subpars. (A) to (C) of former par. (1) as pars. (1) to (3) and striking out former par. (2) which read as follows: “The proportionate share of each participant in the amount of dividends or interest received by the common trust fund and to which section 116 or 128 applies shall be considered for purposes of such section as having been received by such participant.”

Pub. L. 98–3691984—Subsec. (c)(1)(A), (B). substituted “6 months” for “1 year”, wherever appearing, applicable to property acquired after , and before . See Effective Date of 1984 Amendment note below.

Pub. L. 97–4481983—Subsec. (c)(2). reenacted par. (2) without change.

Pub. L. 97–34, § 301(b)(6)(A)Pub. L. 96–2231981—Subsec. (c)(2). , inserted reference to “interest” in heading and text, which continued the amendment made by .

Pub. L. 97–34, § 301(b)(3), inserted “or 128” after “section 116”.

Pub. L. 96–2231980—Subsec. (c)(2). inserted “or interest” after “dividends” in heading and text.

Pub. L. 95–301977—Subsec. (d)(4). struck out par. (4) relating to standard deduction.

Pub. L. 94–4141976—Subsec. (a). inserted provision relating to treatment of two or more bank members of same affiliated group.

Pub. L. 94–455, § 2138Subsec. (a)(1). , designated existing provisions relating to trustee, executor, administrator and guardian as subpar. (A) and added subpar. (B).

Pub. L. 94–455, § 1402(b)(2)Subsec. (c)(1)(A), (B). , provided that “9 months” would be changed to “1 year” wherever appearing.

Pub. L. 94–455, § 1402(b)(1)(H), provided that “6 months” would be changed to “9 months” for taxable years beginning in 1977.

Pub. L. 94–455, § 1901(b)(1)(G)Subsec. (c)(2). , struck out provisions relating to partially tax exempt interest and election of a common trust fund to amortize premiums on bonds and other obligations.

Pub. L. 94–455, § 2131(d)Subsec. (e). , inserted “The admission of a participant shall be treated with respect to the participant as the purchase of, or exchange for, the participating interest”.

Pub. L. 94–455, § 1906(b)(13)(A)Subsec. (g). , struck out “or his delegate” after “Secretary”.

Pub. L. 88–2721964—Subsec. (c)(2). struck out “section 34 or” before “section 116 applies”.

Pub. L. 87–7221962—Subsec. (a)(2). inserted “or the Comptroller of the Currency” after “the Board of Governors of the Federal Reserve System”.

Statutory Notes and Related Subsidiaries

Effective Date of 2003 Amendment

Pub. L. 108–27section 302(f) of Pub. L. 108–27section 1 of this titleAmendment by applicable, except as otherwise provided, to taxable years beginning after , see , set out as an Effective and Termination Dates of 2003 Amendment note under .

Effective Date of 1999 Amendment

Pub. L. 106–36section 3001(e) of Pub. L. 106–36section 351 of this titleAmendment by applicable to transfers after , see , set out as a note under .

Effective Date of 1996 Amendment

Pub. L. 104–188, title I, § 1805(b)110 Stat. 1895

“The amendment made by subsection (a) [amending this section] shall apply to transfers after .”
, , , provided that:

Effective Date of 1988 Amendment

Pub. L. 100–647, title I, § 1008(e)(5)(B)102 Stat. 3440

Pub. L. 99–514section 1378 of this titlesection 1378 of this title“The amendment made by subparagraph (A) [amending this section] shall take effect as if included in the amendments made by section 806 of the Reform Act [], except that section 806(e)(1) [set out as a note under ] shall be applied by substituting ‘’ for ‘’. For purposes of section 806(e)(2) of the Reform Act [set out as a note under ]—
“(i)
a participant in a common trust fund shall be treated in the same manner as a partner, and
“(ii)
subparagraph (C) thereof shall be applied by substituting ‘’ for ‘’ and as if it did not contain the election to include all income in the short taxable year.”
, , , provided that:

Effective Date of 1986 Amendment

Pub. L. 99–514, title VI, § 612(b)(2)(B)100 Stat. 2250

Pub. L. 98–369“If the amendments made by section 1001 of the Tax Reform Act of 1984 [, amending this section and sections 166, 341, 402, 403, 423, 582, 631, 642, 702, 818, 852, 856, 857, 1222, 1223, 1231, 1232, 1233, 1234, 1235, 1246, 1247, and 1248 of this title] cease to apply [see Effective Date of 1984 Amendment note below], effective with respect to property to which such amendments do not apply, subsection (c) of section 584 is amended by striking out ‘6 months’ each place it appears and inserting in lieu thereof ‘1 year’.”
, , , provided that:

section 612(b)(2) of Pub. L. 99–514section 612(c) of Pub. L. 99–514section 301 of this titleAmendment by applicable to taxable years beginning after , see , set out as a note under .

Effective Date of 1984 Amendment

Pub. L. 98–369section 1001(e) of Pub. L. 98–369section 166 of this titleAmendment by applicable to property acquired after , and before , see , set out as a note under .

Effective Date of 1983 Amendment

Pub. L. 97–448Pub. L. 97–34section 109 of Pub. L. 97–448section 1 of this titleAmendment by effective, except as otherwise provided, as if it had been included in the provision of the Economic Recovery Tax Act of 1981, , to which such amendment relates, see , set out as a note under .

Effective Date of 1981 Amendment

section 301(b)(3) of Pub. L. 97–34section 301(b)(6)(A) of Pub. L. 97–34section 301(d) of Pub. L. 97–34section 265 of this titleAmendment by applicable to taxable years ending after , and amendment by applicable to taxable years beginning after , see , set out as a note under .

Effective and Termination Dates of 1980 Amendment

Pub. L. 96–223section 404(c) of Pub. L. 96–223section 265 of this titleAmendment by applicable with respect to taxable years beginning after , and before , see , set out as a note under .

Effective Date of 1977 Amendment

Pub. L. 95–30section 106(a) of Pub. L. 95–30section 1 of this titleAmendment by applicable to taxable years beginning after , see , set out as a note under .

Effective Date of 1976 Amendment

Pub. L. 94–455, title XXI, § 2131(f)(6)90 Stat. 1925

section 683 of this title“The amendments made by subsections (d) and (e) [amending this section and ] shall take effect on , in taxable years ending on or after such date.”
, , , provided that:

Pub. L. 94–455, title XIV, § 1402(b)(1)90 Stat. 1731, , , provided that the amendment made by that section is effective with respect to taxable years beginning in 1977.

Pub. L. 94–455, title XIV, § 1402(b)(2)90 Stat. 1732, , , provided that the amendment made by that section is effective with respect to taxable years beginning after .

section 1901(b)(1)(G) of Pub. L. 94–455section 1901(d) of Pub. L. 94–455section 2 of this titleAmendment by applicable with respect to taxable years beginning after , see , set out as an Effective Date of 1976 Amendment note under .

Pub. L. 94–414, § 290 Stat. 1273

“The amendment made by the first section of this Act [amending this section] shall apply to taxable years beginning after .”
, , , provided that:

Effective Date of 1964 Amendment

Pub. L. 88–272section 201(e) of Pub. L. 88–272section 22 of this titleAmendment by applicable with respect to dividends received after , in taxable years ending after such date, see , set out as a note under .