CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
December 26, 2000
Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
The Chase Manhattan Bank
4 New York Plaza, 6th Floor
New York, New York 10004-2413
Re: FT 495
Gentlemen:
We have acted as counsel for Nike Securities L.P., Depositor
of FT 495 (the "Fund"), in connection with the issuance of units
of fractional undivided interest in the Trust of said Fund (the
"Trust"), under a Trust Agreement, dated December 26, 2000 (the
"Indenture"), between Nike Securities L.P., as Depositor, The
Chase Manhattan Bank, as Trustee, First Trust Advisors L.P., as
Evaluator and First Trust Advisors L.P., as Portfolio Supervisor.
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 Trusts will be administered, and
investments by a Trust from proceeds of subsequent deposits, if
any, will be made, in accordance with the terms of the Indenture.
The assets of the Trust will consist of a portfolio of shares of
Closed-End Funds (the "Equity Securities") that are in regulated
investment companies ("RICs") under the Code and, "zero coupon"
U.S. Treasury bonds (the "Treasury Obligations") (collectively,
with the Equity Securities the "Securities") as set forth in the
Prospectus. For purposes of the following discussion and
opinion, it is assumed that the Equity Securities constitute
shares in funds qualifying as regulated investment companies for
federal income tax purposes, the interest on the Treasury
Obligations is included in gross income for Federal income tax
purposes and the Treasury Obligations are debt for Federal income
tax purposes. Neither the Sponsor nor its counsel has
independently examined the assets to be deposited in and held by
the Trusts.
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 United States Federal income tax
law:
(i) The 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");
(ii) Each Unit holder will be considered the owner of a pro rata
share of each Security of a Trust in the proportion that the
number of Units held by a Unit holder bears to the total number
of Units outstanding. Under subpart E, subchapter J of Chapter 1
of the Code, the income of the Trust will be treated as income of
each Unit holder in the proportion described above, and an item
of Trust income will have the same character in the hands of a
Unit holder as it would have in the hands of the Trust. Each
Unit holder 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. Each Unit holder will
also be required to include in taxable income for federal income
tax purposes, original issue discount with respect to his
interest in any Treasury Obligation held by the Trust at the same
time and in the same manner as though the Unit holder were the
direct owner of such interest. Original issue discount will be
treated as zero with respect to the Treasury Obligations if it is
"de minimis" within the meaning of the Code and applicable
Treasury Regulations.
(iii) A Unit holder will have a taxable event when
the Trust disposes of a Security (whether by sale,
exchange, liquidation, redemption, payment at maturity
or otherwise) or upon the sale or redemption of Units
by such Unit holder. The price a Unit holder pays for
his Units, generally including sales charges, is
allocated among his pro rata portion of each Security
held by the Trust (in proportion to the fair market
values thereof on the valuation date closest to the
date the Unit holder purchases his Units) in order to
determine his tax basis for his pro rata portion of
each Security held by the Trust. The Treasury
Obligations are treated as stripped bonds and may be
treated as bonds issued at an original issue discount
as of the date a Unit holder purchases his Units.
Because the Treasury Obligations represent interests in
"stripped" U.S. Treasury bonds, a Unit holders tax
basis for his pro rata portion of each Treasury
Obligation held by the Trust (determined at the time he
acquires his Units, in the manner described above)
shall be treated as its "purchase price" by the Unit
holder. Original issue discount is effectively treated
as interest for federal income tax purposes and the
amount of original issue discount in this case is
generally the difference between the bonds purchase
price and its stated redemption price at maturity. A
Unit holder will be required to include in gross income
for each taxable year the sum of his daily portions of
original issue discount attributable to the Treasury
Obligations held by the Trust as such original issue
discount accrues and will in general be subject to
federal income tax with respect to the total amount of
such original issue discount that accrues for such year
even though the income is not distributed to the Unit
holders during such year to the extent it is not less
than a "de minimis" amount as determined under Treasury
Regulations relating to stripped bonds. To the extent
the amount of such discount is less than the respective
"de minimis" amount, such discount is generally treated
as zero. In general, original issue discount accrues
daily under a constant interest rate method which takes
into account the semi-annual compounding of accrued
interest. In the case of the Treasury Obligations,
this method will generally result in an increasing
amount of income to the Unit holders each year. For
Federal income tax purposes, a Unit holder's pro rata
portion such of distributions received by the Trust
from the Equity Securities, other than distributions
which are designated as capital gains dividends or
exempt-interest dividends, are taxable as ordinary
income to the extent of the RIC's current and
accumulated "earnings and profits." A Unit holder's
pro rata portion of dividends which exceeds such
current and accumulated earnings and profits will first
reduce a Unit holder's tax basis in such Security, and
to the extent that such dividends exceed a Unit
holder's tax basis in such Security, shall be treated
as gain from the sale or exchange of property. Certain
distributions on the Securities may qualify as "capital
gain dividends," taxable to shareholders (and,
accordingly, to the Unit holders as owners of a pro
rata portion of the Securities) as long-term capital
gain, regardless of how long a shareholder has owned
such shares. Certain distributions on the Securities
may qualify as "exempt interest dividends," which
generally are excluded from a Unitholder's gross income
for federal income tax purposes. Some or all of the
exempt interest dividends, however, may be taken into
account in determining a Unit holder's alternative
minimum tax, and may have other tax consequences (e.g.,
they may affect the amount of your social security
benefits that are taxed.) In addition, distributions
of income and capital gains declared on Securities in
October, November, or December will be deemed to have
been paid to the shareholders (and, accordingly, to the
Unit holders as owners of a pro rata portion of the
Securities) on December 31 of the year they are
declared, even when paid by the RIC during the
following January and received by shareholders or Unit
holders in such following year.
(iv) A Unit holders portion of gain, if any, upon
the sale or redemption of Units or the disposition of
Securities held by the Trust will generally be
considered a capital gain, except in the case of a
dealer or a financial institution. A Unit holders
portion of loss, if any, upon the sale or redemption of
Units or the disposition of Securities held by the
Trust will generally be considered a capital loss,
except in the case of a dealer or a financial
institution.
(v) Gain or loss will be recognized to a Unit
holder (subject to various nonrecognition provisions
under the Code) upon redemption or sale of his or her
Units, except to the extent an in kind distribution of
Securities is received by such Unit holder from a Trust
as discussed below. Such gain or loss is measured by
comparing the proceeds of such redemption or sale with
the adjusted basis of his or her Units. Before
adjustment, such basis would normally be cost if the
Unit holder had acquired his or her Units by purchase.
Such basis may be adjusted to reflect the accrual of
original issue discount of the Treasury Obligations.
Such basis will be reduced, but not below zero, by the
Unit holder's pro rata portion of dividends except for
designated capital gain dividends and exempt interest
dividends paid by the RIC with respect to each Security
which is not taxable as ordinary income. However, any
loss realized by a Unit holder with respect to the
disposition of his or her pro rata portion of the
Equity Securities, to the extent such Unit holder has
owned his or her Units for less than six months or a
Trust has held the Securities for less than six months,
will be disallowed to the extent of the exempt interest
dividends the Unit holder received. If such loss is
not entirely disallowed, it will be treated as long-
term capital loss to the extent of the Unit holder's
pro rata portion of any capital gain dividends received
(or deemed to have been received) with respect to each
Security. A Unit holder's basis in his Units and of
his fractional interest in each Trust asset must be
reduced, but not below zero, by the Unit holder's pro
rata portion of dividends, except for designate capital
gains and exempt interest dividends paid by a RIC, with
respect to each Security which is not taxable as
ordinary income.
(vi) Under the Indenture, under certain
circumstances, a Unit holder tendering Units for
redemption may request an in kind distribution of
Securities upon the redemption of Units or upon the
termination of the Trust. As previously discussed,
prior to the redemption of Units or the termination of
the Trust, a Unit holder is considered as owning a pro
rata portion of each of the Trusts assets. The
receipt of an in kind distribution will result in Unit
holders receiving an undivided interest in Securities
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 will depend upon whether or not a Unit holder
receives cash in addition to Securities. A Unit holder
will not recognize gain or loss with respect to a
Security if a Unit holder only receives Securities in
exchange for his pro rata portion of the Securities
held by the Trust. However, if a Unit holder also
receives cash in exchange for a fractional share of a
Security held by the Trust, such Unit holder will
generally recognize gain or loss based upon the
difference between the amount of cash received for the
fractional share by the Unit holder and his tax basis
in such fractional share of a Security held by the
Trust. 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 rule
described above by the redeeming Unit holder with
respect to each Security owned by the Trust.
Distributions from a Trust attributable to dividends
received by a Trust from the Securities will not be eligible for
the dividends received deduction for corporations.
Section 67 of the Code provides that certain itemized
deductions, such as investment expenses, tax return preparation
fees and employee business expenses will be deductible by
individuals only to the extent they exceed 2% of such
individuals adjusted gross income. Unit holders may be required
to treat some or all of the expenses of the Trust as
miscellaneous itemized deductions subject to this limitation.
A Unit holder will recognize taxable gain (or loss) when all
or part of his pro rata interest in a Security is either sold by
the Trust or redeemed or when a Unit holder 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.
If a Unit holder disposes of a Unit, he or she is deemed
thereby to have disposed of his or her entire pro rata interest
in all Trust assets including his or her pro rata portion of all
of a Trust's assets represented by the Unit.
If more than 50% of the value of the total assets of the RIC
consist of stock or securities in foreign corporations, the RIC
may elect to pass through to its shareholders the foreign income
and similar taxes paid by the RIC in order to enable its share-
holders to take a credit (or deduction) for foreign income taxes
paid by the RIC. If this election is made, Unit holders of a
Trust, because they are deemed to own a pro rata portion of the
Securities held by such Trust, as described above, must include
in their gross income, for federal income tax purposes, both
their portion of dividends received by such Trust from the RIC
and also their portion of the amount which the RIC deems to be
their portion of foreign income taxes paid with respect to, or
withheld from, dividends, interest, or other income of the RIC
from its foreign investments. Unit holders may then subtract
from their federal income tax the amount of such taxes withheld,
or else treat such foreign taxes as deductions from gross income;
however as in the case of investors receiving income directly
from foreign sources, the above described tax credit or deduction
is subject to certain limitations.
In addition it should be noted that capital gains can be
recharacterized as ordinary income in the case of certain
financial transactions that are "conversion transactions"
effective for transactions entered into after April 30, 1993.
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. 333-52466)
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,
CHAPMAN AND CUTLER
EFF/erg
