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Exhibit 3.2
October 16, 2000
Nuveen Investments
333 West Wacker Drive
Chicago, Illinois 60606
The Bank of New York
101 Barclay Street
New York, New York 10286
Re: Nuveen Unit Trusts, Series 106
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Gentlemen:
We have acted as counsel to Nuveen Unit Trusts, Series 106 (the "Fund"), in
connection with the issuance of Units of fractional undivided interest in the
Trust(s), under a Trust Indenture and Agreement dated October 16, 2000 (the
"Indenture") between Nuveen Investments, as Sponsor and Depositor, and The Bank
of New York, as Trustee and Evaluator.
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 we have deemed pertinent.
The opinions expressed herein assume that the Trust(s) will be administered, and
investments by the Trust(s) from proceeds of subsequent deposits, if any, will
be made, in accordance with the terms of the Indenture. The assets of each Trust
will consist of a portfolio of equity securities (the "Securities") as set forth
in the Prospectus. For purposes of the following discussion and opinion, it is
assumed that each Security is equity 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 for Federal
income tax purposes but will be governed by the provisions of subchapter J
(relating to trusts) of Chapter 1, Internal Revenue Code of 1986 (the "Code");
each Unitholder will be treated as the owner of a pro rata portion of each of
the assets of the Trust(s), in the proportion that the
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number of Units held by him bears to the total number of Units outstanding;
under Subpart E, Subchapter J of Chapter 1 of the Code, income of the Trust(s)
will be treated as income of the Unitholders in the proportion described above;
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. Each Unitholder will be
considered to have received his pro rata share of income derived from each Trust
asset when such income is considered to be received by the Trust(s). A
Unitholder's pro rata portion of distributions of cash or property by a
corporation with respect to a Security ("dividends" as defined by Section 316 of
the Code), is taxable as ordinary income to the extent of such corporation's
current and accumulated "earnings and profits." A Unitholder's pro rata portion
of dividends paid on such Security which exceeds such current and accumulated
earnings and profits will first reduce a Unitholder's tax basis in such
Security, and to the extent that such dividends exceed a Unitholder's tax basis
in such Security, shall be treated as gain from the sale or exchange of
property.
II. The price a Unitholder pays for his Units, generally including sales
charges, is allocated among his pro rata portion of each Security held by the
Trusts (in proportion to the fair market values thereof on the valuation date
closest to the date the Unitholder purchases his Units), in order to determine
his tax basis for his pro rata portion of each Security held by the
Trust(s).
III. Gain or loss will be recognized to a Unitholder (subject to various
nonrecognition provisions under the Code) upon redemption or sale of his Units,
except to the extent an in kind distribution of securities is received by such
Unitholder from the Trust(s) as discussed below. Such gain or loss is measured
by comparing the proceeds of such redemption or sale with the adjusted basis of
his Units. Before adjustment, such basis would normally be cost if the
Unitholder had acquired his Units by purchase. Such basis will be reduced, but
not below zero, by the Unitholder's pro rata portion of dividends with respect
to each Security which is not taxable as ordinary income.
IV. If the Trustee disposes of a Trust asset (whether by sale, taxable
exchange, liquidation, redemption, payment on maturity or otherwise) gain or
loss will be recognized to the Unitholder (subject to various nonrecognition
provisions under the Code) and the amount thereof will be 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 (as of the date on which
his Units were acquired) among each of the Trust's 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, but not below zero, by the Unitholder's pro rata portion of dividends
with respect to each Security which are not taxable as ordinary income.
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V. Under the Indenture, under certain circumstances, a Unitholder tendering
Units for redemption may request an in kind distribution of Securities upon the
redemption of Units or upon the termination of the Trust(s). As previously
discussed, prior to the redemption of Units or the termination of the Trust(s),
a Unitholder is considered as owning a pro rata portion of each of the Trust's
assets. The receipt of an in kind distribution will result in a Unitholder
receiving whole shares of stock and possibly cash. The potential Federal income
tax consequences which may occur under an in kind distribution with respect to
each Security owned by the Trust(s) will depend upon whether or not a Unitholder
receives cash in addition to Securities. A "Security" for this purpose is a
particular class of stock issued by a particular corporation. A Unitholder will
not recognize gain or loss if a Unitholder only receives Securities in exchange
for his or her pro rata portion of the Securities held by the Trust(s). However,
if a Unitholder also receives cash in exchange for a fractional share of a
Security held by the Trust(s), such Unitholder will generally recognize gain or
loss based upon the difference between the amount of cash received by the
Unitholder and his tax basis in such fractional share of a Security held by the
Trust(s). The total amount of taxable gains (or losses) recognized upon such
redemption will generally equal the sum of the gain (or loss) recognized under
the rules described above by the redeeming Unitholder with respect to each
Security owned by the Trust(s).
A domestic corporation owning Units in the Trust(s) may be eligible for the
70% dividends received deduction pursuant to Section 243(a) of the Code with
respect to such Unitholder's pro rata portion of dividends received by a Trust
(to the extent such dividends are taxable as ordinary income, as discussed
above, and are attributable to domestic corporations), subject to the
limitations imposed by Sections 246 and 246A of the Code.
To the extent dividends received by the Trust(s) are attributable to
foreign corporations, a corporation that owns Units will not be entitled to the
dividends received deduction with respect to its pro rata portion of such
dividends since the dividends received deduction is generally available only
with respect to dividends paid by domestic corporations.
Section 67 of the Code provides that certain miscellaneous itemized
deductions, such as investment expenses, tax return preparation fees and
employee business expenses will be deductible by an individual only to the
extent they exceed 2% of such individual's adjusted gross income. Unitholders
may be required to treat some or all of the expenses of the Trust(s) as
miscellaneous itemized deductions subject to this limitation.
A Unitholder will recognize taxable gain (or loss) when all or part of the
pro rata interest in a Security is either sold by the Trusts or redeemed or when
a Unitholder disposes of his Units in a taxable transaction, in each case for an
amount greater (or less) than his tax basis therefor, subject to various non-
recognition provisions of the Code.
It should be noted that payments to the Trust(s) of dividends on Securities
that are attributable to foreign corporations may be subject to foreign
withholding taxes and the Unitholders should consult their tax advisors
regarding the potential tax consequences relating to the payment of any such
withholding taxes by the Trust(s). Any dividends withheld as a result thereof
will nevertheless be treated as income to the Unitholders. Because under the
grantor trust rules, an investor is deemed to have paid directly his share of
foreign taxes that have been paid or accrued, if any, and an investor may be
entitled to a foreign tax credit or deduction for United States tax purposes
with respect to such taxes. A required holding period is imposed for such
credits.
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Any gain or loss recognized on a sale or exchange will, under current law,
generally be capital gain or loss.
The scope of this opinion is expressly limited to the matters set forth
herein, and, except as expressly set forth above, we express no opinion with
respect to any other taxes, including foreign, state or local taxes or
collateral tax consequences with respect to the purchase, ownership and
disposition of Units.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-47658) relating to the Units referred to
above and to the use of our name and to the reference to our firm in said
Registration Statement and in the related Prospectus.
Very truly yours,
/s/ Chapman and Cutler
Chapman and Cutler
