EXHIBIT 8.1
SKADDEN, ARPS, SLATE, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
FOUR TIMES SQUARE
NEW YORK 10036-6522
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TEL: (▇▇▇) ▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
December 11, 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-[ ]) (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-
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December 11, 2006
Page 2
MACRO Tradeable Shares" and together with the Up-MACRO Holding Shares, the
"Shares").
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-1 as filed with
the Commission on December 11, 2006 under the
Securities Act;
(iii) the Amended and Restated Claymore MACROshares Oil Up
Holding Trust Agreement (the "Up-MACRO Holding Trust
Agreement"), by and among the Depositor, Claymore
Securities, Inc., as the 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 24,
2006;
(iv) 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;
(v) 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");
(vi) the form of global certificate representing
ownership of the Up-MACRO Holding Shares to be
issued under the Up-MACRO Holding Trust Agreement;
and
(vii) 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 (vii) are
collectively referred to as "Transaction Documents". Capitalized terms used but
not otherwise
MACRO Securities Depositor, LLC
December 11, 2006
Page 3
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 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.
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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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December 11, 2006
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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. ss. 301.7701-4(b). Under Treas.
Reg. ss. 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 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. ss. 301.7701-4(b)
and Treas. Reg. ss. 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.
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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. ss. 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. ss. 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. ss. 301.7701-2(b) and the Up-MACRO Holding Trust
has multiple owners, it
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December 11, 2006
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will be treated as a partnership for U.S. federal income tax purposes under
Treas. Reg. ss. 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
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
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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. ss. 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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December 11, 2006
Page 6
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 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
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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).
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December 11, 2006
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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). In the context of Section 864(b) of the Code, the issue
was addressed by the Service in 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
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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.
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).
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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,
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
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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 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.
MACRO Securities Depositor, LLC
December 11, 2006
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"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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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