Tax Facts

7926 / Can an otherwise qualified RIC avoid disqualification as a RIC for failing to meet the RIC asset diversification tests?

In certain circumstances, an otherwise qualified RIC will not be disqualified as a RIC if the asset diversification tests ( Q 7925) are satisfied at the end of one quarter, but at the end of the next quarter the RIC fails the tests. If the failure arises only because of fluctuations in the value of the RIC’s securities or because of distributions to shareholders, the RIC will not lose its status.


In other words, the RIC will only be disqualified if the RIC has acquired new property or securities and the failure results from this acquisition. However, if the RIC eliminates the discrepancy causing the failure within 30 days after the close of the quarter, the RIC will be treated as though it satisfied the asset diversification tests at the close of the quarter and will not be disqualified.1





1.  IRC § 851(d)(1).


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