EXHIBIT 8.01 SIDLEY & AUSTIN A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS DALLAS One First National Plaza WASHINGTON, D.C. ______ Chicago, Illinois 60603 ______ LOS ANGELES Telephone 312 853 7000 LONDON ______ Facsimile 312 853 7036 ______ NEW YORK SINGAPORE Founded 1866 ______ TOKYO WRITER'S DIRECT NUMBER January 28, 1997 Merrill Lynch Investment Partners Inc. General Partner of ML Principal Protection L.P. Merrill Lynch World Headquarters South Tower, 6th Floor World Financial Center New York, New York 10080-6106 Re: Registration Statement on Form S-1 ---------------------------------- Dear Sir or Madam: We refer to Post-Effective Amendment No. 1 to the Registration Statement on Form S-1 (Registration No. 333-7593), filed by ML Principal Protection L.P. (the "Partnership") and ML Principal Protection Trading L.P. (the "Trading Partnership") with the Securities and Exchange Commission under the Securities Act of 1933 (the "Securities Act") on or about January 28, 1997. Pursuant to Rule 429 under the Securities Act, the form of prospectus set forth in the Registration Statement (the "Prospectus") also relates to the Registration Statement on Form S-1 (Reg. No. 33-73914) declared effective on July 14, 1994. We have reviewed such data, documents, questions of law and fact and other matters as we have deemed pertinent for the purpose of this opinion. Based upon the foregoing, we hereby confirm our opinions expressed under the caption "Federal Income Tax Consequences" in the Prospectus that: (i) each of the Partnership and the Trading Partnership in which the Partnership will invest will be taxed as a partnership for federal income tax purposes (assuming that Merrill Lynch Investment Partners Inc. makes a capital contribution to the Trading Partnership in at least the amount contemplated by the Prospectus); (ii) each Partner will be required to report on his tax return his allocable share of the Partnership's income, gains, losses, and deductions; (iii) based upon the contemplated trading activities of the Trading Partnership, the Trading Partnership should be treated as engaged in the conduct of a trade or business for federal income tax purposes, and, as a result, the ordinary and necessary business expenses incurred by SIDLEY & AUSTIN CHICAGO Merrill Lynch Investment Partners Inc. January 28, 1997 Page 2 the Trading Partnership in conducting its commodity futures trading business should not be subject to limitation under section 67 of the Internal Revenue Code of 1986, as amended (the "Code") or under section 68 of the Code; and (iv) based on the contemplated trading activities of the Trading Partnership and of the Partnership, the income earned by the Partnership will not constitute "unrelated business taxable income" under section 511 of the Code to employee benefit plans and other tax-exempt entities which purchase Units; provided that such Units purchased by such plans and entities are not "debt-financed" within the meaning of Section 514 of the Code. We also advise you that in our opinion the description set forth under the caption "Federal Income Tax Consequences" in the Prospectus correctly describes (subject to the uncertainties referred to therein) the material aspects of the federal income tax treatment to United States individual investors, as of the date hereof, of an investment in the Partnership. We hereby consent to the filing of this opinion as an Exhibit to the Registration Statement and to the inclusion in the Prospectus of our opinion set forth under the caption "Federal Income Tax Consequences." Very truly yours, SIDLEY & AUSTIN