EX-99.(12)(A) 3 0003.txt FORM OF OPINION _____________, 2000 Board of Trustees Franklin Tax-Free Trust 777 Mariners Island Boulevard San Mateo, CA 94404 RE: AGREEMENT AND PLAN OF REORGANIZATION DATED _________, 2000 (THE "PLAN"), MADE BY FRANKLIN TAX-FREE TRUST (THE "TRUST"), ON BEHALF OF ITS SERIES, FRANKLIN ARIZONA INSURED TAX-FREE FUND (THE "ACQUIRED FUND") AND FRANKLIN ARIZONA TAX-FREE FUND (THE "ACQUIRING FUND") ___________ Ladies and Gentlemen: You have requested our opinion concerning certain federal income tax consequences of the reorganization of the Acquired Fund and the Acquiring Fund, which will consist of: (i) the acquisition, by the Acquiring Fund, of substantially all of the property, assets and goodwill of the Acquired Fund, in exchange solely for Class A shares of beneficial interest, without par value, of the Acquiring Fund (the "Acquiring Fund Shares"); (ii) the distribution by the Acquired Fund of the Acquiring Fund Shares in complete liquidation of the Acquired Fund; and (iii) the subsequent dissolution of the Acquired Fund, as soon as is practicable after the closing (the "Reorganization"), all upon and subject to the terms and conditions of the Plan. In rendering our opinion, we have reviewed and relied upon: (a) the Plan, dated ____________, 2000, made by the Trust on behalf of the Acquired Fund and the Board of Trustees Franklin Tax-Free Trust _______________, 2000 Page 2 Acquiring Fund; (b) the proxy materials provided to shareholders of the Acquired Fund in connection with the Special Meeting of Shareholders of the Acquired Fund held on February 21, 2001; (c) certain representations concerning the Reorganization made to us by the Trust in a letter dated ____________, 2000 (the "Representation Letter"); (d) all other documents, financial and other reports and corporate minutes we deemed relevant or appropriate; and (e) such statutes, regulations, rulings and decisions as we deemed material in rendering this opinion. All terms used herein, unless otherwise defined, are used as defined in the Plan. For purposes of this opinion, we have assumed that the Acquired Fund, on the date of the Reorganization, satisfies, and immediately following the Reorganization, the Acquiring Fund will satisfy, the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), for qualification as a regulated investment company. Based on the foregoing, and provided the Reorganization is carried out in accordance with the applicable laws of The Commonwealth of Massachusetts, the Plan and the Representation Letter, it is our opinion that: 1. The acquisition by the Acquiring Fund of substantially all of the assets of the Acquired Fund in exchange for the Acquiring Fund Shares, followed by the distribution by the Acquired Fund to its shareholders of the Acquiring Fund Shares in complete liquidation of the Acquired Fund, will qualify as a reorganization within the meaning of Section 368(a)(1) of the Code, and the Acquired Fund and the Acquiring Fund will each be a "party to the reorganization" within the meaning of Section 368(b) of the Code. 2. No gain or loss will be recognized by the Acquired Fund upon the transfer of substantially all of its assets to the Acquiring Fund in exchange solely for the Acquiring Fund Shares under Section 361(a) and Section 357(a) of the Code. 3. No gain or loss will be recognized by the Acquiring Fund upon the receipt by it of substantially all of the assets of the Acquired Fund in exchange solely for the Acquiring Fund Shares under Section 1032(a) of the Code. 4. No gain or loss will be recognized by the Acquired Fund upon the distribution of the Acquiring Fund Shares to its shareholders in liquidation of the Acquired Fund under Section 361(c)(1) of the Code. 5. The basis of the assets of the Acquired Fund received by the Acquiring Fund will be the same as the basis of such assets to the Acquired Fund immediately prior to the Reorganization pursuant to Section 362(b) of the Code. Board of Trustees Franklin Tax-Free Trust ___________________, 2000 Page 3 6. The holding period of the assets of the Acquired Fund received by the Acquiring Fund will include the period during which such assets were held by the Acquired Fund under Section 1223(2) of the Code. 7. No gain or loss will be recognized by the shareholders of the Acquired Fund upon the exchange of their shares of the Acquired Fund (the "Acquired Fund Shares") for the Acquiring Fund Shares (including fractional shares to which they may be entitled), under Section 354(a) of the Code. 8. The basis of the Acquiring Fund Shares received by the shareholders of the Acquired Fund (including fractional shares to which they may be entitled) will be the same as the basis of the Acquired Fund Shares exchanged therefor under Section 358(a)(1) of the Code. 9. The holding period of the Acquiring Fund Shares received by the shareholders of the Acquired Fund (including fractional shares to which they may be entitled) will include the holding period of the Acquired Fund Shares surrendered in exchange therefor, provided that the Acquired Fund Shares were held as a capital asset on the date of the Reorganization, under Section 1223(1) of the Code. 10. The Acquiring Fund will succeed to and take into account, as of the date of the transfer as defined in Section 1.381(b)-1(b) of the regulations issued by the United States Treasury (the "Treasury Regulations"), the items of the Acquired Fund described in Section 381(c) of the Code, subject to the conditions and limitations specified in Sections 381, 382, 383 and 384 of the Code and the Treasury Regulations. Our opinion is based upon the Code, the applicable Treasury Regulations promulgated thereunder, the present positions of the Internal Revenue Service (the "Service") as are set forth in published revenue rulings and revenue procedures, present administrative positions of the Service, and existing judicial decisions, all of which are subject to change either prospectively or retroactively. We do not undertake to make any continuing analysis of the facts or relevant law following the date of this opinion. Our opinion is conditioned upon the performance by the Acquiring Fund and the Acquired Fund of their undertakings in the Plan and the Representation Letter. Board of Trustees Franklin Tax-Free Trust ___________________, 2000 Page 4 This opinion is being rendered to the Acquiring Fund and the Acquired Fund, and may be relied upon only by such Funds and the shareholders of each. Very truly yours, STRADLEY, RONON, STEVENS & YOUNG, LLP By: ______________________________________