BlackRock variable-rate preferreds may be treated as equity, IRS says

By Jennifer Chiou

New York, April 11 - BlackRock Advisors, LLC announced that 44 of its tax-exempt closed-end funds received a private letter ruling from the Internal Revenue Service stating that variable-rate demand preferred shares issued by a fund will be treated as equity for federal income tax purposes.

This, in turn, would make it possible for the funds to designate dividends paid to holders of VRDP as tax-exempt income.

BlackRock said in a Monday news release that proceeds from any fund's issue of VRDPs subsequent to the ruling are anticipated for the redemption of auction-rate preferred shares.

The New York-based closed-end investment manager added that its board continues to explore potential alternative forms of leverage in order to provide liquidity to holders of ARPS.

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