U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                  FORM N-17F-2

               Certificate of Accounting of Securities and Similar
                          Investments in the Custody of
                         Management Investment Companies

                    Pursuant to Rule 17f-2 (17 CFR 270.17f-2)

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1.  Investment Company Act File Number:           Date examination completed:
    811-5086                                      December 31, 1997 
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2.  State identification Number:  N/A
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    AL            AK           AZ            AR           CA           CO  
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    CT            DE           DC            FL           GA           HI  
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    ID            IL           IN            IA           KS           KY  
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    LA            ME           MD            MA           MI           MN  
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    MS            MO           MT            NE           NV           NH  
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    NJ            NM           NY            NC           ND           OH  
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    OK            OR           PA            RI           SC           SD  
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    TN            TX           UT            VT           VA           WA  
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    WV            WI           WY            PUERTO RICO
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    Other (specify):
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3.  Exact name of investment company as specified in registration statement:
    Churchill Tax-Free Trust, Churchill Tax-Free Fund of Kentucky portfolio   
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4.  Address of principal executive office (number, street, city, state, zip
    code): 
    380 Madison Avenue, Suite 2300, New York, NY 10017
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INSTRUCTIONS

This Form must be  completed  by  investment  companies  that  have  custody  of
securities or similar investments.

Investment Company

1. All items must be completed by the investment company.

2. Give this Form to the independent public accountant who, in compliance with
   Rule 17f-2 under the Act and applicable state law, examines  securities and
   similar investments in the custody of the investment company.

Accountant

3. Submit this Form to the Securities and Exchange  Commission and appropriate
   state securities  administrators  when filing the certificate of accounting
   required by Rule 17f-2  under the Act and  applicable  state law.  File the
   original  and one  copy  with  the  Securities  and  Exchange  Commission's
   principal office in Washington, D.C., one copy with the regional office for
   the region in which the investment  company's principal business operations
   are conducted, and one copy with the appropriate state administrator(s), if
   applicable.

          THIS FORM MUST BE GIVEN TO YOUR INDEPENDENT PUBLIC ACCOUNTANT

Note: The estimated average burden hours are made solely for purposes of the
      Paperwork Reduction Act, and are not derived from a comprehensive or
      even a representative  survey or study of the costs of SEC rules and
      forms. Direct any comments  concerning the accuracy of the estimated
      average burden hours for compliance with SEC rules and forms to Kenneth
      A. Fogash, Deputy Executive Director, U.S. Securities and Exchange
      Commission, 450 Fifth St., N.W., Washington,  D.C. 20549 and Gary
      Waxman, Clearance Officer, Office of Management and Budget, Room 3208,
      New Executive Office Building, Washington, D.C. 20503.




KPMG Peat Marwick LLP
345 Park Avenue
New York, NY 10154


                    Independent Accountants' Report


To the Board of Trustees of Churchill Tax-Free Fund of Kentucky and
the Securities and Exchange Commission:

We have examined management's assertion about Churchill Tax-Free Fund of
Kentucky's (the "Fund") compliance with the requirements of subsections (b)
and (c) of Rule 17f-2 under the Investment Company Act of 1940 as of December
31, 1997, included in the accompanying Management Statement regarding
Compliance with Certain Provisions of the Investment Company Act of 1940. 
Management is responsible for the Fund's compliance with those requirements.
Our responsibility is to express an opinion on management's assertion about
the Fund's compliance based on our examination.

Our examination was made in accordance with standards established by the
American Institute of Certified Public Accountants and, accordingly, included
examining, on a test basis, evidence about the Fund's compliance with those
requirements and performing such other procedures as we considered necessary
under the circumstances.  Included among our procedures were the following
tests which we performed as of December 31, 1997, and the period from
September 30, 1997 (the date of our last examination) through December 31,
1997, with respect to securities transactions, without prior notice to
management:

* we agreed all securities reported by the Fund's accounting records to
  Custody records as of December 31, 1997;
* for securities which were to be redeemed, we verified subsequent settlement
  on Custody records as of December 31, 1997; and
* we reviewed the Banc One Investment Management Group "Report on Controls
  Placed in Operation and Tests of Operating Effectiveness for Trust
  Application System" ("SAS 70 Report") for the period January 1, 1997 to
  December 31, 1997, and noted that no negative findings were reported in
  the areas of Asset Custody and Control and Trust Accounting System.

We believe that our examination provides a reasonable basis for our opinion.
Our examination does not provide a legal determination of the Fund's
compliance with specified requirements.

In our opinion, management's assertion that Churchill Tax-Free Fund of
Kentucky was in compliance with the provisions of subsections (b) and (c) of
Rule 17f-2 under the Investment Company Act of 1940 as of December 31, 1997,
and for the period from September 30, 1997 through December 31, 1997, is
fairly stated in all material respects.

This report is intended solely for the information and use of management of
Churchill Tax-Free Fund of Kentucky and the Securities and Exchange
Commission and should not be used for any other purpose.
                    
                                              /s/ KPMG Peat Marwick LLP    

January 23, 1998