Liquidating trust investment company act
Each owner must recognize a gain or loss on the deemed distribution received in liquidation.
Such gain or loss is measured by the difference between the fair value of the liquidating distribution and the owner's adjusted basis in the corporation.
The basis of property received in complete liquidation of a partner's interest is the adjusted basis of the partner's interest in the partnership, reduced by any money distributed in the same transaction.
Thus, the partner's basis in the property can never be greater than the partner's basis in the partnership.
Over the last decade, a number of firms have been established to provide trustee services in addition to trust departments of banks.
A liquidating trust is generally considered a grantor trust for tax purposes.
Since the business assets are deemed to have been distributed to the owners and then transferred to the liquidating trust, there will be an immediate recognition of a gain or loss from liquidation of the former business by the owners.
The trust will be considered a liquidating trust with the primary purpose of liquidating its assets.
Should the purpose of the entity change, such as to carry on a for-profit business, then the entity will no longer be considered a liquidating trust.
Download PDF When "Liquidating Trust" is mentioned, most people associate this with bankruptcy.
In a bankruptcy, a liquidating trust may be formed whereby certain assets are placed in a trust for the benefit of creditors who may have certain claims against those assets.
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Under Revenue Procedure 82-58, the IRS will issue a private letter ruling if 8 conditions are met.