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| ## Comptroller of the Currency                                        |
|                                                                       |
| > Administrator of National Banks                                     |
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Washington, DC 20219

October 10, 2001 **Corporate Decision #2001-30**

#### November 2001

Richard J. McCullen

Senior Vice President & Counsel

Bank One, N.A.

OH1-0152

100 East Broad Street

Columbus, OH 43271-0152

> Re: Operating Subsidiary Application of American National Bank and
> Trust Company of Chicago, Chicago, Illinois
>
> Application Control No. 2001-ML-08-0013

Dear Mr. McCullen:

This is in response to your August 30, 2001, letter on behalf of
American National Bank and Trust Company of Chicago, Chicago, Illinois
("Bank"). Pursuant to 12 C.F.R. § 5.34, the Bank proposes to expand the
activities of an existing operating subsidiary, Bank One Exchange
Corporation ("Operating Subsidiary"). For the reasons given below, we
conclude that the proposed expanded activity of the operating subsidiary
is permissible and approve the Bank's application.

The Operating Subsidiary currently provides its customers with
"like-kind" exchange services pursuant to section 1031 of the Internal
Revenue Code, 26 U.S.C. § 1031. The Bank proposes that the Operating
Subsidiary expand its services to include acting as an exchange
accommodation titleholder ("EAT") -- through limited liability
corporation subsidiaries -- for reverse like-kind exchanges. Reverse
like-kind exchanges permit taxpayers to identify and "acquire" the
replacement properties before disposing of relinquished properties.

Your letter represents that, as an EAT, the Operating Subsidiary's role
in a reverse like-kind exchange will be minimal. At the request of a
customer and after conducting a full evaluation (including credit risk
rating) of the financial condition and prospects of the customer, the
Operating Subsidiary will create a single-member limited liability
company ("LLC") of which it will be the sole member. The LLC will then
use funds provided by the customer to acquire "qualified indicia of
ownership" in the replacement property.[^1]

The LCC will hold qualified indicia of ownership in the replacement
property until its customer can arrange for the sale of the relinquished
property -- a period not to exceed 185 days.[^2] When the customer is
prepared to sell the relinquished property, (1) the customer will
transfer the relinquished property to the third party purchaser and (2)
the Operating Subsidiary will transfer its ownership interest in LLC to
the customer, who will become the sole member of the LLC. Proceeds from
the sale of the relinquished property flow first to the Operating
Subsidiary to cover any remaining expenses of facilitating the exchange
and then to the customer.[^3]

The Operating Subsidiary's role as an EAT is purely as an intermediary.
At the request of a customer, the LLC will take funds provided by its
customer, exchange those funds for qualified indicia of ownership in the
replacement property, and hold that interest -- on behalf of the
customer -- until the customer can arrange the sale of the relinquished
property. In this sense, the LLC's role is, functionally, akin to that
of a custodian. The LLC shares in neither the risks nor the rewards of
the reverse like-kind exchange. Contractual transfer obligations and
risks will remain with the customer, and the Operating Subsidiary
(through the LLC) will be compensated solely by a fee from its customer.
As such, acting as an EAT closely resembles the safekeeping and
custodial functions[^4] national banks and their operating subsidiaries
have traditionally performed for their customers.

The qualified indicia of ownership that the LLC will acquire in the
replacement property will be a form of ownership less than full legal
title, *i.e.*, the LLC will never have ownership encompassing the right
to possess, use, or convey the property. For example, the LLC may
acquire a contractual right to purchase the replacement property, and
the customer will exercise this contractual right when it becomes the
sole member of the LLC. The OCC has held that the acquisition by a
national bank of a contractual right to purchase real property --
provided the bank does not exercise the right -- is not an interest in
real estate. *See* Interpretive Letter No. 603, *reprinted in*
\[1992-1993 Transfer Binder\] Fed. Banking L. Rep. (CCH) ¶ 83,437 (Aug.
31, 1992). Therefore, 12 U.S.C. § 29 is not implicated by the Bank's
proposal.[^5]

Based on the foregoing, the Bank's application to expand the activities
of the Operating Subsidiary is approved. This approval, and the
activities and communications by OCC employees in connection with the
filing, do not constitute a bilateral contract, express or implied, or
any other obligation binding upon the OCC, the U.S., any agency or
entity of the U.S., or an officer or employee of the U.S., and do not
affect the ability of the OCC to exercise its supervisory, regulatory,
and examination authorities under applicable law and regulations. The
foregoing may not be waived or modified by any employee or agent of the
OCC or the U.S.

In the event of questions, please contact Richard T. Erb, Licensing
Manager, Large Bank Licensing, at (202) 874-5060 or by email:
<largebanks@occ.treas.gov>.

Sincerely,

**-signed-**

Julie L. Williams,

First Senior Deputy Comptroller and Chief Counsel

[^1]: *See* I.R.S. Revenue Procedure 2000-37 (October 2, 2000). In the
    event that the customer borrows the funds that it provides to the
    Operating Subsidiary, the Bank represents that neither the Operating
    Subsidiary nor the LLC will have contractual liability on the loan.
    The Bank further represents that neither the Operating Subsidiary
    nor the LLC will directly borrow funds for the acquisition of the
    replacement property.

[^2]: *See* Revenue Procedure 2000-37, *supra.*

[^3]: ^?^ The agreement entered into between the Operating Subsidiary
    and its customer will contain contractual guarantees and indemnities
    by the customer. The Bank represents that, should the proceeds from
    the sale of the relinquished property be insufficient to cover
    remaining expenses, the customer would be required by the agreement
    to provide additional funds to the Operating Subsidiary to cover
    such expenses.

[^4]: Conditional Approval No. 479 (July 27, 2001), and citations
    therein (safekeeping functions of national banks are
    long-established and extensively recognized); Conditional Approval
    No. 267 (January 12, 1998); Letter from Thomas G. DeShazo, Deputy
    Comptroller of the Currency (June 10, 1974) (national bank may
    provide safekeeping services for state lottery tickets and
    materials).

[^5]: ^?^ The LLC's ability to acquire the right to purchase the
    replacement property, but not to exercise that right, is analogous
    to national banks' authority to acquire and hold, but not exercise,
    equity warrants as consideration for a loan. *See* 12 C.F.R. §
    7.1006. Equity warrants represent a contractual right to purchase
    prescribed amounts of equity in the issuers.