EXHIBIT 8.1
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
FOUR TIMES SQUARE
NEW YORK 10036-6522
________
TEL: (▇▇▇) ▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
November 29, 2006
MACRO Securities Depositor, LLC
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ #▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Re: Claymore MACROshares Oil Up Holding Trust
Claymore MACROshares Oil Up Tradeable Trust
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Ladies and Gentlemen:
We have acted as tax counsel to MACRO Securities Depositor, LLC (the
"Depositor") in its capacity as depositor of the Claymore MACROshares Oil Up
Holding Trust (the "Up-MACRO Holding Trust") and the Claymore MACROshares Oil Up
Tradeable Trust (the "Up-MACRO Tradeable Trust" and, together with the Up-MACRO
Holding Trust, the "MACRO Trusts" and, collectively, with the Depositor, the
"MACRO Entities") in connection with the formation of the Trusts and the
preparation and filing of a Registration Statement on Form S-1 (Registration
No. 333-116566), as amended (the "Registration Statement"), including the
prospectus included in Part I of the Registration Statement relating to the
Shares (as defined herein) (the "Prospectus"), with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"). The Registration Statement relates to the proposed
registration under the Securities Act of (i) shares with a stated par amount as
set forth in the Prospectus, representing a fractional undivided beneficial
interest in and ownership of the Up-MACRO Holding Trust (the "Up-MACRO Holding
Shares") and (ii) shares with a stated par amount as set forth in the
Prospectus, representing a fractional undivided beneficial interest in and
ownership of the Up-MACRO Tradeable Trust (the "Up-MACRO Tradeable Shares" and
together with the Up-MACRO Holding Shares, the "Shares").
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November 29, 2006
Page 2
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction of
(i) the Certificate of Formation of the Depositor, dated April 28,
2004 and the Second Amended and Restated Operating Agreement of
the Depositor, dated October 1, 2006;
(ii) the Registration Statement on Form S-3 as filed with the
Commission on June 17, 2004 under the Securities Act;
(iii) Amendment No. 1 on Form S-1 to the Registration Statement as
filed with the Commission on November 26, 2004 under the
Securities Act;
(iv) Amendment No. 2 on Form S-1 to the Registration Statement as
filed with the Commission on May 10, 2005 under the Securities
Act;
(v) Amendment No. 3 on Form S-1 to the Registration Statement as
filed with the Commission on August 3, 2005 under the
Securities Act;
(vi) Amendment No. 4 on Form S-1 to the Registration Statement as
filed with the Commission on February 14, 2006 under the
Securities Act;
(vii) Amendment No. 5 on Form S-1 to the Registration Statement as
filed with the Commission on June 16, 2006 under the
Securities Act;
(viii) Amendment No. 6 on Form S-1 to the Registration Statement as
filed with the Commission on August 11, 2006 under the
Securities Act;
(ix) Amendment No. 7 on Form S-1 to the Registration Statement as
filed with the Commission on November 1, 2006 under the
Securities Act;
(x) Amendment No. 8 on Form S-1 to the Registration Statement as
filed with the Commission on November 27, 2006 under the
Securities Act;
(xi) Amendment No. 9 on Form S-1 to the Registration Statement as
filed with the Commission on November 29, 2006 under the
Securities Act;
(xii) the Claymore MACROshares Oil Up Holding Trust Agreement, by and
among the Depositor, Claymore Securities, Inc., as the
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November 27, 2006
Page 3
administrative agent (the "Administrative Agent") and as a
marketing agent (the "Marketing Agent"), MACRO Financial, LLC,
as an additional marketing Agent (also, a "Marketing Agent"),
and Investors Bank & Trust Company, as the trustee (the
"Trustee"), dated as of November 15, 2006;
(xiii) the Amended and Restated Claymore MACROshares Oil Up Holding
Trust Agreement (the "Up-MACRO Holding Trust Agreement"), by
and among the Depositor, the Administrative Agent, the
Marketing Agents and the Trustee, dated as of November 24,
2006;
(xiv) the Claymore MACROshares Oil Up Tradeable Trust Agreement, by
and among the Depositor, the Administrative Agent, the
Marketing Agents and the Trustee, dated as of November 15,
2006;
(xv) the Amended and Restated Claymore MACROshares Oil Up Tradeable
Trust Agreement (the "Up-MACRO Tradeable Trust Agreement" and
together with the Up-MACRO Holding Trust Agreement, the "Trust
Agreements"), by and among the Depositor, the Administrative
Agent, the Marketing Agents and the Trustee, dated as of
November 24, 2006;
(xvi) the form of Participants Agreement (the "Participants
Agreement"), proposed to be entered into by and among the
Depositor, the Trustee, the Administrative Agent and the
Authorized Participants party thereto as may be listed on
Schedule I thereto from time to time (such entities, the
"Authorized Participants");
(xvii) the form of global certificate representing ownership of the
Up-MACRO Holding Shares to be issued under the Up-MACRO Holding
Trust Agreement; and
(xviii) the form of global certificate representing ownership of the
Up-MACRO Tradeable Shares to be issued under the Up-MACRO
Tradeable Trust Agreement.
The documents identified in paragraphs (i) through (xviii) are
collectively referred to as "Transaction Documents". Capitalized terms used but
not otherwise defined in this opinion have the meaning specified, either
directly or by reference, in the Transaction Documents.
You have asked us (i) whether, for U.S. federal income tax purposes,
the Up-MACRO Tradeable Trust will be classified as an association subject to tax
as a corporation and (ii) whether, for U.S. federal income tax purposes, the
Up-MACRO Holding Trust will be treated as a partnership and not as an
association or publicly traded
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(1) Unless otherwise indicated, all "Section" references hereinafter are to
the Internal Revenue Code of 1986, as amended (the "Code") and the
Treasury Regulations promulgated thereunder.
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November 29, 2006
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partnership (within the meaning of Section 7704)(1) subject to tax as a
corporation. In rendering our opinion, we have examined and relied upon the
Transaction Documents and such other documents as we have deemed necessary or
appropriate as a basis for the opinion set forth below, and we have assumed that
the parties to such documents will comply with the terms thereof, that such
documents are not amended and that such documents are enforceable in accordance
with their respective terms.
In our examination, we have assumed the genuineness of all signatures,
including endorsements, the legal capacity of all natural persons, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified, electronic or
photostatic copies and the authenticity of the originals of such copies. We did
not independently establish or verify any facts upon which this opinion letter
depends, and we have relied upon the statements, representations, and
certifications of officers and other representatives of the MACRO Entities.
In rendering our opinion, we have also considered and relied upon the
Code, administrative rulings, judicial decisions, Treasury Regulations, and such
other authorities as we have deemed appropriate. The statutory provisions,
Treasury Regulations, interpretations, and other authorities upon which our
opinion is based are subject to change, potentially retroactively. In addition,
there can be no assurance that positions contrary to those stated in our opinion
will not be taken by the Internal Revenue Service (the "Service") or, if
challenged, a court. Moreover, a change in the authorities or the accuracy or
completeness of any information, document, certificate, records, statement,
representation, covenant or assumption upon which this opinion is based could
affect our conclusions.
I. U.S. Federal Income Tax Characterization of the Up-MACRO Tradeable Trust.
The Up-MACRO Tradeable Trust is a trust formed under the laws of the
State of New York pursuant to the Up-MACRO Tradeable Trust Agreement. It is
possible that the Up-MACRO Tradeable Trust could be treated as a trust for U.S.
federal income tax purposes, and if that were the case, it would be treated as a
"grantor trust" within the meaning of Subchapter E of Part 1 of Subchapter J of
the Code.
Whether the Up-MACRO Tradeable Trust is treated as a trust for U.S.
federal income tax purposes depends on whether it is "simply an arrangement to
protect or conserve [the Up-MACRO Tradeable Trust assets] for its beneficiaries"
as provided under Treas. Reg. Section 301.7701-4(b). Under Treas. Reg. Section
301.7701-4(c)(1), an investment trust with a single class of ownership
interests, representing undivided beneficial interests in the assets of the
trust, will be classified as a trust if there is no power under the trust
agreement to vary the investment of the certificate holders. Under Section 3.3
of the Up-MACRO Tradeable Trust Agreement, the Up-MACRO Tradeable Trust
generally is not permitted to "borrow money, issue debt or reinvest proceeds
derived from investments, or pledge any of its assets." The exclusive purpose
of and functions of the Up-MACRO Tradeable Trust are set forth under Section
3.3(b) of the Up-MACRO Tradeable Trust
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November 29, 2006
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Agreement and generally the Up-MACRO Tradeable Trust's activities are limited
to issuing and selling Up-MACRO Tradeable Shares, using proceeds received from
the issuance and sale of such shares to purchase Up-MACRO Holding Shares,
distributing to the holders of Up-MACRO Tradeable Shares all amounts received
from the Up-MACRO Holding Trust, and exchanging Up-MACRO Tradeable Shares for
Up-MACRO Holding Shares.
Alternatively, if the Up-MACRO Tradeable Trust were determined not to
be a trust for U.S. federal income tax purposes because it is not "simply an
arrangement to protect or conserve [the Up-MACRO Tradeable Trust assets] for its
beneficiaries," as provided under Treas. Reg. Section 301.7701-4(b) and Treas.
Reg. Section 301.7701-4(c), then its treatment for U.S. federal income tax
purposes would be determined in a manner identical to that of the Up-MACRO
Holding Trust as set forth below in Section II.
Accordingly, whether the Up-MACRO Tradeable Trust is properly treated
as a grantor trust or as a partnership, it will not be classified as an
association taxable as a corporation for U.S. federal income tax purposes.
II. U.S. Federal Income Tax Characterization of the Up-MACRO Holding Trust.
The Up-MACRO Holding Trust is a trust formed under the laws of the
State of New York pursuant to the Up-MACRO Holding Trust Agreement. Domestic
"Eligible entities" (i.e., entities not explicitly classified as a corporation
under Treas. Reg. Section 301.7701-2(b)) with at least two members are, by
default, treated as partnerships for U.S. federal income taxation purposes, and
if they have only a single member, are treated as disregarded entities. Treas.
Reg. Section 301.7701-3(b). Therefore, because trusts formed under the laws of
New York are not included in the list of entities treated as per se corporations
under Treas. Reg. Section 301.7701-2(b) and the Up-MACRO Holding Trust has
multiple owners, it will be treated as a partnership for U.S. federal income tax
purposes under Treas. Reg. Section 301.7701-3(b), as it is not a trust for U.S.
federal income tax purposes.(2)
Accordingly, as a partnership, the Up-MACRO Holding Trust would not be
subject to tax as a corporation unless it were so treated under Section 7704.
Section 7704 provides that, subject to certain exceptions, a partnership the
interests in which are (i) traded on an established securities market or (ii)
readily tradable on a secondary market (or the substantial equivalent thereof)
will be treated as a corporation for U.S. federal income tax purposes. Section
7704(c), however, excepts certain publicly traded
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(2) The Up-MACRO Holding Trust will not be treated as a trust for U.S. federal
income tax purposes, because it fails the requirements of Treas. Reg.
Section 301.7701-4(c) as to "investment trusts". In particular, the
Up-MACRO Holding Trust has the power to reinvest the proceeds realized
upon the maturity or sale of its assets.
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November 29, 2006
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partnerships ("PTPs") from treatment as a corporation for tax purposes if a
sufficient portion of their gross income is essentially passive income.
Specifically, Section 7704(c) provides that a PTP shall not be treated as a
corporation for tax purposes if 90 percent or more of its gross income consists
of "qualifying income."
The Up-MACRO Holding Trust's only sources of income will be interest
paid with regard to the Treasuries, gain, if any, resulting from the disposition
of the Treasuries, amounts received in certain sale and repurchase transactions
(commonly known as "repos"), discussed further below, discussed further below,
interest equivalent amounts received in respect of loans of the Treasuries
qualifying as security loans under Section 1058 and the gains resulting from the
Income Distribution Agreement and the Settlement Contracts. In general, under
Section 7704(d)(1)(G), income and gains in respect of commodities and, under
Section 7704(d)(1)(A), interest constitute qualifying income. Each of Section
7704(d)(1)(G) and Section 7704(d)(1)(A), however, require that certain
conditions be satisfied. These are discussed below.
In addition, under Section 7704(d)(4) "qualifying income" includes
income which would qualify under Section 851(b)(2)(A), including "payments with
respect to securities loans under Section 512(a)(5)." Section 512(a)(5)(A)
provides that "payments with respect to securities loans" includes all amounts
received in respect of a security (as defined in section 1236(c)) transferred by
the owner to another person in a transaction to which section 1058 applies."
Accordingly, the amounts received by the Up-MACRO Holdings Trust with respect to
loans of the Treasuries under Section 1058 will constitute "qualifying income."
The Up-MACRO Holding Trust may enter into certain "repo" transactions.
Whether a "repo" is treated for U.S. federal income tax purposes as a sale of an
asset or a deemed loan secured by the asset purported to be sold depends upon
the specific facts and circumstances of the relevant "repo" transaction, but in
either event, the income of the Up-MACRO Holding Trust with respect to the
"repo" will be "qualifying income". If a "repo" were treated as a true sale of
the underlying asset, then the income from the sale would be gain from the
disposition of a capital asset and would constitute "qualifying income" under
Section 7704(d)(1)(F). If a "repo" were treated as a deemed loan for U.S.
federal income tax purposes, amounts received by the Up-MACRO Holding Trust
would constitute interest on a deemed loan, and such interest generally is
"qualifying income" under Section 7704(d)(1)(A), as discussed below.
Under Section 7704(d)(1)(G), income and gains from commodities or
futures, forwards, and options with respect to commodities constitute
"qualifying income" for purposes of Section 7704(c) only in the case of a
partnership, the principal activity of which is the buying and selling of
commodities. Although there is no authority directly construing the meaning of
"buying and selling of commodities or options, futures, and forwards with
respect to commodities", in our view, the Up-MACRO Holding Trust's income
arising from the Settlement Contracts will, subject to
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November 29, 2006
Page 7
the discussion below, be treated as income from entering into and terminating
commodity forward contracts and will fall within the scope of Section
7704(d)(1)(G).(3)
The term "commodities" is undefined in the Code and there are no
regulations explaining its meaning for purposes of Section 7704(d)(1)(G). For
example, in the regulations pertaining to Section 864(b) of the Code, the
regulations merely state that the term commodity "does not include goods or
merchandise in the ordinary channels of commerce."(4) The Service did, however,
clarify in Revenue Ruling 73-158, that "'commodities' is used in section
864(b)(2)(B) of the Code in its ordinary financial sense and includes all
products that are traded in and listed on commodity exchanges located in the
United States. . . [and] includes the actual commodity and commodity futures
contracts."(5) Rev. Rul. 73-158, which concerned the trading of raw sugar, was
issued at a time when, in general, the only items that were considered
commodities for regulatory purposes were tangible products like wheat, cotton,
rice and livestock. In 1974, however, Congress enacted the Commodity Futures
Trading Commission Act of 1974 (the "CFTC Act"), which substantially broadened
the definition of "commodity" to include " . . . all other goods and articles,
.. . ., and all other services, rights, and interest in which contracts for
future delivery are presently or in the future dealt in . . .." See Internal
Revenue Service Priv. Let. Rul. ("PLR") 8540033 (July 3, 1985) (describing the
change to the law governing the regulation of commodities).(6) The legislative
history of the CFTC Act confirms that the intent of Congress was to cover
futures markets involving non-traditional goods and services. Id. (quoting S.
Rep. No. 1131, 93d Cong., 2d Sess. 19 and H.R. Rep. No. 975, 93d Cong., 2d Sess.
29 (1974)).
There is no authority in the Code or the regulations explaining the
meaning of forward with respect to commodities for purposes of Section
7704(d)(1)(G).
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(3) Given that the Up-MACRO Holding Trust's only activities will be entering
into (and terminating) the Settlement Contracts and the Income
Distribution Agreement, both of which are contracts in respect of
commodities, and buying, and collecting income in respect of the
Treasuries -- and that the Treasuries represent, in essence, nothing more
than collateral to support the potential obligations arising under the
Settlement Contracts and the Income Distribution Agreement, there should
be little doubt that the Up-MACRO Holding Trust's principal activity is
the buying and selling of commodities.
(4) Section 1.864-2(d)(3).
(5) Rev. Rul. 73-158, 1973-1 C.B. 337 (emphasis added).
(6) PLRs are addressed to the taxpayer upon whose behalf the letter was
requested and may not be cited as precedent. Section 6110(k)(3). Where,
however, the reasoning of a PLR is persuasive and where there are no
rulings or cases that have adopted a contrary position, the PLR may be a
useful indication of how the Service viewed a given issue at the time the
PLR was issued. In the context of Section 864(b) of the Code, the issue
was addressed by the Service in
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November 29, 2006
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PLR 8813012 (December 23, 1987). PLR 8813012 addressed the question
of whether a forward contract in crude oil would qualify as a commodity for
purposes of Section 864(b) and whether such a forward contract was "of a kind"
traded on an exchange for purposes of Section 864(b)(2)(B). Noting, "[w]▇▇▇▇
forward contracts are not themselves traded on a commodity exchange, forward
contracts in crude oil serve essentially the same financial purpose as the
futures in crude oil that are traded on a [commodity exchange]", the Service
concluded that a forward contract in crude oil was a commodity for purposes of
Section 864(b). In addition, the fact that the Settlement Contract is a
cash-settled contract should not alter its status as a commodity or a forward
on a commodity. See PLR 8540033 (Jul. 3, 1985) ("The --- fact that trading in
cash settlement futures contracts is regulated by the CFTC rather than the
Securities and Exchange Commission is evidence that a cash settlement contract
should be considered a commodity in the ordinary financial sense.")
Accordingly, although there is no authority directly on point, we believe that
the Settlement Contracts will constitute commodities or forwards with respect
to commodities for purposes of Section 7704(d)(1)(G).
There is no binding authority addressing whether entering into and
terminating commodity forward contracts constitutes buying and selling of
commodities, but courts have addressed the issue in the context of futures
contracts.(7) In Comm'r ▇. ▇▇▇▇▇▇▇▇▇,(8) the taxpayer sought to treat amounts
paid to settle commodities futures as neither the sale of a commodity contract
or the underlying commodity but as cash amounts paid that should be treated as
ordinary losses. In rejecting the taxpayer's argument and treating the losses
as capital, the court held "implicit in the transactions [entering contracts
and extinguishing them with monetary settlement] is the agreement and
understanding that actual purchases and sales, and not mere wagering
transactions, are being carried on."(9) In addition, treating the Up-MACRO
Holding Trust's entering and terminating of commodity forwards contracts as
"buying and selling" for purposes of Section 7704(c) is consistent with the
stated purpose of the provision.(10) Moreover,
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(7) Futures and forwards are dissimilar in three respects: 1) futures
contracts are traded on a formal exchange whereas forward contracts are
not; 2) in general, actual physical delivery is not expected in a futures
contract but is expected in a forward contract; and 3) typically, futures
are in respect of standardized assets whereas forwards may be in respect
of nonstandardized assets. None of these differences should have any
bearing on whether entering into or terminating contracts should be
considered buying and selling of those contracts.
(8) 120 F.2d 768 (5th Cir. 1941).
(9) Id. at 770.
(10) See H.R. Rep. No. 100-391, pt. 2 at 18 (1987). "The purpose of
distinguishing between passive-type income and other income is to
distinguish those partnerships that are engaged in activities commonly
considered as essentially no more than investments, and those activities
more typically conducted in corporate form that are in the nature of
business activities." Given that Section 7704 itself
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November 29, 2006
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refers to forwards, it would be anomalous indeed if a standard method of
triggering income recognition under a forward (i.e., cash settlement) were
excluded from the category of qualifying income.
Section 1234A provides that gain from the cancellation, lapse or expiration or
termination of a right or obligation which is a capital asset will be treated as
gain or loss from the sale of a capital asset; accordingly, the termination of
the commodity forward contracts may be considered a sale for purposes of Section
7704(c). Therefore, although there is no direct authority, in our view, the
Up-MACRO Holding Trust's income from entering and terminating forward contracts
will constitute "qualifying income" for purposes of Section 7704(c).
Under Section 7704(d)(1)(A), interest constitutes "qualifying income"
for purposes of Section 7704(c), unless under Section 7704(d)(2) the interest is
derived in the conduct of a "financial or insurance business." In our view,
because the Trustee cannot manage the assets of the Up-MACRO Holding Trust in
any ordinary sense, and in particular, cannot sell the Treasuries or other
assets (except in the event of a Redemption or upon the termination of a
Settlement Contract) and cannot acquire additional assets (except in the event
of a Subsequent Paired Issuance or an Up-MACRO Subsequent Issuance), the
Up-MACRO Holding Trust would not be found to be carrying on a financial
business. However, the Service has not provided guidance as to what constitutes
a financial or insurance business, and accordingly our conclusion is based on
our interpretation of the statutory language of Section 7704 and not on
authorities construing the statute. Accordingly, we believe that because the
Up-MACRO Holding Trust would not be found to be engaged in a financial business
and the interest received on the Treasuries will constitute "qualifying income."
We note that under Section 7704(c)(3), the general "qualifying income"
exception of Section 7704(c) does not apply to any partnership if such a
partnership "would be described in Section 851(a) if such partnership were a
domestic corporation." A domestic corporation is described under Section
851(a), if it (i) is registered under the Investment Company Act of 1940, or has
an election under such Act to be treated as a business development company or
(ii) is a common trust fund or similar fund excluded by section 3(c)(3) of the
Investment Company Act of 1940 from the definition of "investment company". The
Up-MACRO Holding Trust will not be registered under the Investment Company Act
of 1940, has no election to be treated as a business development company under
such Act and is not a common trust fund excluded by section 3(c)(3) of such Act.
Accordingly, the Up-MACRO Holding Trust will be eligible for the exception
provided in Section 7704(c).
As a result, based on and subject to the foregoing, although there is
no authority directly addressing the issue, the Up-MACRO Holding Trust will, in
our opinion, qualify for the Section 7704(c) exception and, in our opinion,
will, therefore, not be classified as an association or a publicly traded
partnership subject to tax as a corporation for U.S. federal income tax
purposes.
* * *
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November 29, 2006
Page 10
Except as set forth above, we express no other opinion. This opinion is
furnished solely in connection with the transaction described herein and is not
to be relied upon for any other purpose without our prior written consent. This
opinion is expressed as of the date hereof, and we are under no obligation to
supplement or revise our opinion to reflect any legal developments or factual
matters arising subsequent to the date hereof or the impact of any information,
document, certificate, record, statement, representation, covenant, or
assumption relied upon herein that becomes incorrect or untrue.
Very truly yours,
/s/ ▇▇▇▇▇▇▇, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP