In addition to the SEC regulations, the Internal Revenue Code (IRC) also causes unique issues for managed futures mutual funds. For example, mutual funds avoid corporate-level tax by qualifying as "regulated investment companies" under the IRC. And under the "90% Test," at least 90% of a regulated investment company's gross income each year must come from dividends, interest, gains from the sale of stock, securities or foreign currencies, certain payments with respect to securities loans and other income derived with respect to the investment company's business of investing in stocks, securities or currencies. The IRS has ruled that income from a fund's investments in commodity futures contracts does not constitute qualifying income for purposes of the 90% test.
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