Exhibit 8.1
September 22, 1998
MERIT Securities Corporation
10900 Nuckols Road
Glen Allen, Virginia 23060
Federal Income Tax Matters
Dear Sirs:
We have acted as counsel to MERIT Securities Corporation, a
Virginia corporation (the "Issuer"), in connection with the preparation of the
Registration Statement (the "Registration Statement"), which is being filed with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Act"), for the registration under the Act of $1,000,000,000
aggregate principal amount of its Collateralized Bonds (the "Bonds"). The Bonds
will be issued pursuant to an indenture and an indenture supplement with respect
to each series of Bonds (collectively, the "Indenture"), between the Issuer and
Chase Bank of Texas National Association (formerly Texas Commerce Bank
National Association, as trustee (the "Trustee").
We have reviewed the originals or copies of (i) the Articles
of Incorporation, by-laws, and other corporate documents of the Issuer; (ii)
certain resolutions of the Board of Directors of the Issuer; (iii) the form of
an indenture; (iv) the Registration Statement and the prospectus included
therein; and (v) such other documents as we have deemed necessary or appropriate
for the purposes of this opinion.
Based on the foregoing, we are of opinion that the statements
and legal conclusions contained Prospectus under the caption "Certain Federal
Income Tax Consequences" in the Prospectus filed as part of the Registration
Statement are correct in all respects that are material to the holders of the
Bonds, and the discussion thereunder does not omit any material provision with
respect to the matters covered. Subject to the qualifications stated herein, we
also are of opinion that, with respect to each series of Bonds issued pursuant
to the Registration Statement, if (i) the Issuer and the
MERIT Securities Corporation
September 22, 1998
Page 2
Trustee, comply with all the provisions of the Indenture
and (ii) the Issuer issues and sells the Bonds as described in the Registration
Statement and the related prospectus supplement, the Bonds of such series will
be treated for federal income tax purposes as evidences of indebtedness and not
as an ownership interest in the collateral securing them or an equity interest
in the Issuer or in a separate association taxable as a corporation.
Although section 385 of the Internal Revenue Code of 1986, as
amended, authorizes the Department of the Treasury to issue regulations defining
instruments as equity or indebtedness for federal income tax purposes, no such
regulations have been issued. Furthermore, there are no controlling regulations,
published rulings, or judicial decisions involving securities with terms
substantially the same as the Bonds that discuss, for federal income tax
purposes, (i) whether such securities constitute equity or indebtedness or (ii)
whether the collateral relating to such securities has been pledged or sold to
the holders of the securities. Therefore, we or other counsel for the Issuer
will analyze the facts and circumstances surrounding the issuance and sale of
each series of Bonds and rulings and judicial decisions involving situations
that we considered to be analogous upon delivery of each series of Bonds, we or
our counsel for the Issuer a separate opinion regarding the characterization of
the Bonds of a given series as evidences of indebtedness.
This opinion and the discussion
contained in the Registration Statement under the caption "Certain Federal
Income Tax Consequences" represent conclusions as to the application to the
Bonds of existing law, regulations, administrative rules and practices, and
legislative history. There can be no assurance, however, that contrary positions
will not be taken by the Internal Revenue Service or that existing law will not
change.
We bring to your attention the fact that our legal opinions
are an expression of professional judgment and are not a guaranty of a result.
This letter and the legal opinions herein are intended for the
information solely of the addressee hereof and solely for the purposes of the
transactions described herein and are not to be relied upon by any other person
or entity, or for any other purpose, or quoted in whole or in part, or otherwise
referred to, in any document, for any purpose without the prior written consent
of this firm. We do not undertake to advise you of matters which may come to our
attention subsequent to the date hereof which may affect our legal opinions
expressed herein.
We hereby consent to the reference to our firm under the
caption "Certain Federal Income Tax Consequences" and to the filing of this
opinion as an Exhibit to the Registration Statement.
Very truly yours,
ARTER & HADDEN LLP