Final US Treasury Regulations Provide Additional Flexibility in Determining the Tax Implications of Money Market Fund Share Transactions

July 25, 2016

Final U.S. Treasury regulations under Section 446 of the Internal Revenue Code of 1986, providing for the use of the net asset value accounting method for transactions in money market fund shares were released on July 8, 2016. The Final Regulations were released in advance of the October 14, 2016 date by which certain MMFs are required to adopt a floating net asset value in accordance with the 2014 amendments to Rule 2a-7, under the Investment Company Act of 1940. With the exception of an MMF that qualifies as a “government MMF” or a “retail MMF,” 2 Rule 2a-7 requires an MMF to calculate its FNAVs to the nearest one-hundredth of one cent (e.g., US$1.0000) based on the current fair value of its underlying investments. Eligible government MMFs and retail MMFs would continue to compute their NAVs based on the amortized cost of their underlying investments and, as such, generally would be permitted to maintain a stable NAV.

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