online dating by david deangelo - Tax consequences of liquidating

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.

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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.

The remaining assets and liabilities are transferred into the newly formed trust and the former owners of the liquidating fund become unit holders or beneficiaries of the trust.

The newly formed trust is governed by a trust agreement executed between the former fund and the trustees before liquidation of the fund.

A liquidating trust may also be an effective method for a fund manager to wind down a fund without having a significant role in the liquidation.

At the end of the fund's life cycle or term, the fund manager may have certain assets that are not easily liquidated and convertible into cash for distribution to the owners of the fund.

Upon the deemed contribution of the assets to the liquidating trust, the trust will have the same adjusted bases in its assets as the partners had in those assets immediately prior to the transfer to the trust.

Conclusion As noted, the use of a liquidating trust may be a cost efficient method to liquidate certain assets.

However, a partner generally must recognize gain on the distribution of property (other than money) if the partner contributed appreciated property during the 7-year period before the distribution.

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