Rules for liquidating
Also, if the time period is unreasonably prolonged, the status of the entity may change from a liquidating trust.If a trust is created outside of Chapter 11 of the Bankruptcy Code, a private letter ruling may be requested if conditions of Revenue Procedure 82-58 are met.Under Revenue Procedure 82-58, the IRS will issue a private letter ruling if 8 conditions are met.
The role of the trustee of the liquidating trust is to administer and manage the liquidating trust, sell assets, pay creditors, resolve any claims and distribute any available funds to the beneficiaries of the trust.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.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.
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Such agreement provides for trustee duties, compensation of trustees, and governance as well as distributions and other administrative matters.