EXHIBIT 3.2
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
June 7, 2000
Van Kampen Funds Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
The Bank of New York
Unit Investment Trust Division
101 Barclay Street
New York, New York 10286
Re: Van Kampen Focus Portfolios, Municipal Series 334
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Gentlemen:
We have acted as counsel for Van Kampen Funds Inc., Depositor of Van
Kampen Focus Portfolios, Municipal Series 334 (the "Fund"), in connection with
the issuance of Units of fractional undivided interest in the several Trusts of
said Fund under a Trust Agreement dated June 7, 2000 (the "Indenture") between
Van Kampen Funds Inc., as Depositor, American Portfolio Evaluation Services, a
division of Van Kampen Investment Advisory Corp., as Evaluator, and The Bank of
New York, as Trustee.
In this connection, we have examined the Registration Statement, the
form of Prospectus proposed to be filed with the Securities and Exchange
Commission, the Indenture and such other instruments and documents as we have
deemed pertinent. For purposes of the following opinions, it is assumed that
each asset of the Trusts is debt, the interest on which is excluded from gross
income for federal income tax purposes.
Based upon the foregoing and upon an investigation of such matters of
law as we consider to be applicable, we are of the opinion that, under existing
Federal income tax law:
(i) Each Trust is not an association taxable as a corporation but will be
governed by the provisions of subchapter J (relating to trusts) of Chapter
1, Internal Revenue Code of 1986 (the "Code").
(ii) Each Unitholder will be considered as owning a pro rata share of each asset
of the respective Trust in the proportion that the number of Units of such
Trust held by him bears to the total number of Units outstanding of such
Trust. Under Subpart E, Subchapter J of Chapter 1 of the Code, income of
each Trust will be treated as income of each Unitholder of the respective
Trust in the proportion described, and an item of Trust income will have
the same character in the hands of a Unitholder as it would have in the
hands of the Trustee. Accordingly, to the extent that the income of a Trust
consists of interest and original issue discount excludable from gross
income under Section 103 of the Code, such income will be excludable from
Federal gross income of the Unitholders, except in the case of a Unitholder
who is a substantial user (or a person related to such user) of a facility
financed through issuance of any industrial development bonds or certain
private activity bonds held by the respective Trust. In the case of such
Unitholder who is a substantial user, interest received with respect to his
Units attributable to such industrial development bonds or such private
activity bonds is includable in his gross income. In the case of certain
corporations, interest on the Bonds is included in computing the
alternative minimum tax pursuant to Section 56(c) of the Code and the
branch profits tax imposed by Section 884 of the Code with respect to U.S.
branches of foreign corporations.
(iii) Gain or loss will be recognized to a Unitholder upon redemption or sale of
his Units. Such gain or loss is measured by comparing the proceeds of such
redemption or sale with the adjusted basis of the Units. If a Bond is
acquired with accrued interest, that portion of the price paid for the
accrued interest is added to the tax basis of the Bond. When this accrued
interest is received, it is treated as a return of capital and reduces the
tax basis of the Bond. If a Bond is purchased for a premium, the amount of
the premium is added to the tax basis of the Bond. Bond premium is
amortized over the remaining term of the Bond, and the tax basis of the
Bond is reduced each tax year by the amount of the premium amortized in
that tax year. Accordingly, Unitholders must reduce the tax basis of their
Units for their share of accrued interest received by the respective Trust,
if any, on Bonds delivered after the Unitholders pay for their Units to the
extent that such interest accrued on such Bonds before the date the Trust
acquired ownership of the Bonds (and the amount of this reduction may
exceed the amount of accrued interest paid to the seller) and,
consequently, such Unitholders may have an increase in taxable gain or
reduction in capital loss upon the disposition of such Units. In addition,
such basis will be increased by the Unitholder's aliquot share of the
accrued original issue discount (and market discount, if the Unitholder
elects to include market discount in income as it accrues) with respect to
each Bond held by the Trust with respect to which there was original issue
discount at the time the Bond was issued (or which was purchased with
market discount) and reduced by the annual amortization of bond premium, if
any, on Bonds held by the Trust.
(iv) If the Trustee disposes of a Trust asset (whether by sale, payment on
maturity, liquidation, redemption or otherwise) gain or loss is recognized
to the Unitholder and the amount thereof is measured by comparing the
Unitholder's aliquot share of the total proceeds from the transaction with
his basis for his fractional interest in the asset disposed of. Such basis
is ascertained by apportioning the tax basis for his Units among each of
the Trust assets (as of the date on which his Units were acquired) ratably
according to their values as of the valuation date nearest the date on
which he purchased such Units. A Unitholder's basis in his Units and of his
fractional interest in each Trust asset must be reduced by the amount of
his aliquot share of accrued interest received by the Trust, if any, on
Bonds delivered after the Unitholders pay for their Units to the extent
that such interest accrued on the Bonds before the date the Trust acquired
ownership of the Bonds (and the amount of this reduction may exceed the
amount of accrued interest paid to the seller), must be reduced by the
annual amortization of bond premium, if any, on Bonds held by the Trust and
must be increased by the Unitholder's share of the accrued original issue
discount (and market discount, if the Unitholder elects to include market
discount in income as it accrues) with respect to each Bond which, at the
time the Bond was issued, had original issue discount (or which was
purchased with market discount).
(v) In the case of any Bond held by the Trust where the "stated redemption
price at maturity" exceeds the "issue price", such excess shall be original
issue discount. With respect to each Unitholder, upon the purchase of his
Units subsequent to the original issuance of Bonds held by the Trust,
Section 1272(a)(7) of the Code provides for a reduction in the accrued
"daily portion" of such original issue discount upon the purchase of a Bond
subsequent to the Bond's original issue, under certain circumstances. In
the case of any Bond held by the Trust the interest on which is excludable
from gross income under Section 103 of the Code, any original issue
discount which accrues with respect thereto will be treated as interest
which is excludable from gross income under Section 103 of the Code.
(vi) We have examined the Municipal Bond Unit Investment Trust Insurance
policies, if any, issued to certain of the Trusts on the Date of Deposit by
AMBAC Assurance Corporation, Financial Guaranty Insurance Corporation or a
combination thereof. Each such policy, or a combination of such policies,
insures all bonds held by the Trustee for that particular Trust (other than
bonds described in paragraph (vii)) against default in the prompt payment
of principal and interest. In our opinion, any amount paid under each any
such policy, or a combination of such policies, which represents maturing
interest on defaulted Bonds held by the Trustee will be excludable from
Federal gross income if, and to the same extent as, such interest would
have been so excludable if paid in normal course by the Issuer of the
defaulted Bonds provided that, at the time such policies are purchased, the
amounts paid for such policies are reasonable, customary and consistent
with the reasonable expectation that the Issuer of the Bonds, rather than
the insurer, will pay debt service on the Bonds. Paragraph (ii) of this
opinion is accordingly applicable to insurance proceeds representing
maturing interest.
(vii) Certain bonds in the portfolios of certain of the Insured Trusts have been
insured by the issuers thereof against default in the prompt payment of
principal and interest (the "Insured Bonds"). Insurance has been obtained
for such Insured Bonds, or, in the case of a commitment, the Bonds will be
ultimately insured under the terms of such an insurance policy, which are
designated as issuer Insured Bonds on the portfolio pages of the respective
Trusts in the prospectus for the Fund, by the issuer of such Insured Bonds.
Insurance on Insured Bonds is effective so long as such Insured Bonds
remain outstanding. For each of these Insured Bonds, we have been advised
that the aggregate principal amount of such Insured Bonds listed on the
portfolio page for the respective Trust was acquired by the applicable
Trust and are part of the series of such Insured Bonds listed in the
aggregate principal amount. Based upon the assumption that the Insured
Bonds of the Trust are part of the series covered by an insurance policy
or, in the case of a commitment, will be ultimately insured under the terms
of such an insurance policy, it is our opinion that any amounts received by
the applicable Trust representing maturing interest on such Insured Bonds
will be excludable from federal gross income if, and to the same extent as,
such interest would have been so excludable if paid in normal course by the
Issuer provided that, at the time such policies are purchased, the amounts
paid for such policies are reasonable, customary and consistent with the
reasonable expectation that the issuer of the Insured Bonds, rather than
the insurer, will pay debt service on the Insured Bonds. Paragraph (ii) of
this opinion is accordingly applicable to such payment.
Sections 1288 and 1272 of the Code provide a complex set of rules
governing the accrual of original issue discount. These rules provide that
original issue discount accrues either on the basis of a constant compound
interest rate or ratably over the term of the Bond, depending on the date the
Bond was issued. In addition, special rules apply if the purchase price of a
Bond exceeds the original issue price plus the amount of original issue discount
which would have previously accrued based upon its issue price (its "adjusted
issue price"). The application of these rules will also vary depending on the
value of the Bond on the date a Unitholder acquires his Units, and the price the
Unitholder pays for his Units.
Because the Trusts do not include any "private activity" bonds within
the meaning of Section 141 of the Code issued on or after August 8, 1986, none
of the Trust Funds' interest income shall be treated as an item of tax
preference when computing the alternative minimum tax. In the case of
corporations, for taxable years beginning after December 31, 1986, the
alternative minimum tax depends upon the corporation's alternative minimum
taxable income ("AMTI") which is the corporation's taxable income with certain
adjustments.
Pursuant to Section 56(c) of the Code, one of the adjustment items used
in computing AMTI of a corporation (other than an S corporation, Regulated
Investment Company, Real Estate Investment Trust, REMIC or FASIT) for taxable
years beginning after 1989, is an amount equal to 75% of the excess of such
corporation's "adjusted current earnings" over an amount equal to its AMTI
(before such adjustment item and the alternative tax net operating loss
deduction). "Adjusted current earnings" includes all tax-exempt interest,
including interest on all Bonds in the Trust, and tax-exempt original issue
discount.
Effective for tax returns filed after December 31, 1987, all taxpayers
are required to disclose to the Internal Revenue Service the amount of
tax-exempt interest earned during the year.
Section 265 of the Code provides for a reduction in each taxable year
of 100 percent of the otherwise deductible interest on indebtedness incurred or
continued by financial institutions, to which either Section 585 or Section 593
of the Code applies, to purchase or carry obligations acquired after August 7,
1986, the interest on which is exempt from Federal income taxes for such taxable
year. Under rules prescribed by Section 265, the amount of interest otherwise
deductible by such financial institutions in any taxable year which is deemed to
be attributable to tax-exempt obligations acquired after August 7, 1986, will
generally be the amount that bears the same ratio to the interest deduction
otherwise allowable (determined without regard to Section 265) to the taxpayer
for the taxable year as the taxpayer's average adjusted basis (within the
meaning of Section 1016) of tax-exempt obligations acquired after August 7,
1986, bears to such average adjusted basis for all assets of the taxpayer.
We also call attention to the fact that, under Section 265 of the Code,
interest on indebtedness incurred or continued to purchase or carry Units is not
deductible for Federal income tax purposes. Under rules used by the Internal
Revenue Service for determining when borrowed funds are considered used for the
purpose of purchasing or carrying particular assets, the purchase of Units may
be considered to have been made with borrowed funds even though the borrowed
funds are not directly traceable to the purchase of Units. However, these rules
generally do not apply to interest paid on indebtedness incurred for
expenditures of a personal nature such as a mortgage incurred to purchase or
improve a personal residence.
"The Revenue Reconciliation Act of 1993" (the "Tax Act") subjects
tax-exempt bonds to the market discount rules of the Code effective for bonds
purchased after April 30, 1993. In general, market discount is the amount (if
any) by which the stated redemption price at maturity exceeds an investor's
purchase price (except to the extent that such difference, if any, is
attributable to original issue discount not yet accrued) subject to a statutory
de minimis rule. Market discount can arise based on the price a Trust pays for
Bonds or the price a Unitholder pays for his or her Units. Under the Tax Act,
accretion of market discount is taxable as ordinary income; under prior law, the
accretion had been treated as capital gain. Market discount that accretes while
a Trust holds a Bond would be recognized as ordinary income by the Unitholders
when principal payments are received on the Bond, upon sale or at redemption
(including early redemption), or upon the sale or redemption of his or her
Units, unless a Unitholder elects to include market discount in taxable income
as it accrues.
Very truly yours,
CHAPMAN AND CUTLER
