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EXHIBIT 3.2
(ON CHAPMAN AND CUTLER LETTERHEAD)
December 29, 2000
Nuveen Investments
333 W. Wacker Drive
Chicago, Illinois 60606
RE: Nuveen Tax-Free Unit Trust, Series 1213
Gentlemen:
We have served as counsel with respect to Nuveen Tax-Free Unit Trust,
Series 1213 (the "Fund") in connection with the issuance under the Trust
Indenture and Agreement, dated the date hereof between Nuveen Investments, as
Depositor, and The Chase Manhattan Bank, as Trustee, of Units of fractional
undivided interest (the "Units"), as evidenced by a book entry position or
certificate, if requested by the purchaser of Units, in the one or more Trusts
of said Fund.
We have also served as counsel with respect to all previous Series of the Nuveen
Tax-Free Unit Trust and as such have previously examined such pertinent records
and documents and matters of law as we have deemed necessary, including (but not
limited to) the Trust Indenture and Agreements with respect to those series. We
have also examined such pertinent records and documents and matters of law as we
have deemed necessary including (but not limited to) the Trust Indenture and
Agreement relating to Nuveen Tax-Free Unit Trust, Series 1213.
We have concluded that the Trust Indenture and Agreement for the Fund and its
counterpart in each of the prior issues of Nuveen Tax-Free Unit Trust are in all
material respects substantially identical. For purposes of the following
opinions, it is assumed that each asset of the Trust is debt, the interest on
which is excluded from gross income for federal income tax purposes.
Based upon the foregoing, and upon such matters of law as we consider to be
applicable, we are of the opinion that, under existing federal income law:
(i) Each of the Trusts will not be 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 of the Fund in the proportion that the number of
Units of such Trust held by him bears to the total number of outstanding Units
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 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
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.
Moreover, in the case of certain corporations, interest on all of the Bonds is
included in computing the alternative minimum tax pursuant to Sections 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
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. Such gain or loss is measured by comparing
the proceeds of such redemption or sale with the adjusted basis of such Units.
In addition, such basis will be increased by both 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
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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, 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 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 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) Certain bonds in the portfolio of the Trust have been insured by the
issuers, underwriters, the Sponsor or others against default in the prompt
payment of principal and interest (the "Insured Bonds"). Such Insured Bonds are
so designated on the portfolio pages in the Prospectus for each Trust. Insurance
on Insured Bonds is effective so long as such Bonds remain outstanding. For each
of these Insured Bonds, we have been advised that the aggregate principal amount
of such Bonds listed on the portfolio page was acquired by the Trust and are
part of the series of such Insured Bonds in the listed aggregate principal
amount. Based upon the assumption that the Insured Bonds of the Trust are part
of a series covered by an insurance policy, it is our opinion that any amounts
received by the 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 Bonds. Paragraph (ii) of this opinion is accordingly
applicable to such payment representing maturing interest.
Because the Trusts do not include any "private activity bonds" within the
meaning of Section 57(a)(5) of the Code issued on or after August 8, 1986, none
of the Trust's 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 tax years
beginning in 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.
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.
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.
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Section 265 of the Code provides for a reduction in each taxable year of 100% 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 (with
certain exceptions), 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.
Chapman and Cutler has expressed no opinion with respect to taxation under any
other provisions of Federal law. Ownership of the Units may result in collateral
Federal income tax consequences to certain taxpayers. Prospective investors
should consult their tax advisors as to the applicability of any such collateral
consequences.
We have not examined any of the Bonds to be deposited and held in the Trust or
the proceedings for the issuance thereof or the opinions of bond counsel with
respect thereto, and therefore express no opinion as to the exemption from State
income taxes of interest on the Bonds if received directly by a Unitholder.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-52048) 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.
We hereby consent to the reliance upon this opinion by Carter, Ledyard &
Milburn, counsel for the Trustee, in rendering its opinion as to certain New
York State tax matters delivered of even date herewith.
Respectfully submitted,
CHAPMAN AND CUTLER
