The Internal Revenue Service issued a notice aimed at calming fears that it would act against insurance-dedicated money market funds that take advantage of a new temporary guarantee program.

Notice 2008-92 provides that the Treasury Department and the IRS will not assert that participation in the temporary guarantee program for money market funds by an insurance-dedicated money market fund causes a violation of the diversification requirements of Section 817(h) of the Tax Code in the case of any segregated asset account that invests in the fund.

In addition, the notice provides that the Treasury Department and the IRS will not assert that such a fund's participation in the program causes the holder of a variable contract supported by a segregated asset account that invests in the fund to be treated as an owner of the fund.

The IRS issued the notice because some practitioners had expressed concern that participating in the program might raise tax issues for money market funds whose beneficial interests are held exclusively by one or more segregated asset accounts of one or more insurance companies.

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