In addition, the Trust has entered into binding contracts to sell its 550-650 Corporetum, Lisle Illinois property and its Summit Pointe apartments property located in Oklahoma City, Oklahoma.
Adding to the concern of trustees is the fact that, by its nature, the trust is designed to liquidate and distribute all of its assets.
As a result, while virtually all agreements governing such liquidating trusts contain indemnification and protecting the trustee except in the case of fraud or gross negligence, the trust may ultimately lack the financial wherewithal to support such provisions.
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The Trust’s sole purpose is to continue to seek to sell these assets in an orderly fashion to maximize value to its beneficiaries.
Subject to certain exceptions related to transfer by will, intestate succession or operation of law, interests in the Trust are not transferable, nor do beneficiaries have authority or power to sell or in any other manner dispose of their interest in the Trust.
This article is a continuation of a series of articles on the general overview of U. taxation of different types of foreign and domestic trusts with the focus on liquidating trusts. §301.7701-4(d) states that a trust will be considered a liquidating trust “if it is organized for the primary purpose of liquidating and distributing the assets transferred to it, and if its activities are all reasonably necessary to, and consistent with, the accomplishment of that purpose”. the trust’s business activities will obscure its liquidating purpose), then the trust will be treated as a partnership or an association taxable as a corporation. §301.7701-4(d) states, “if the liquidation is unreasonably prolonged or if the liquidation purpose becomes so obscured by business activities that the declared purpose of liquidation can be said to be lost or abandoned, the status of the organization will no longer be that of a liquidating trust.” Presumptively, Regs. 94-45, the IRS stated that it will treat organizations created under Chapter 11 of the Bankruptcy Code as liquidating trusts as long as all of the IRS extensive requirements are satisfied. Second, the IRS will analyze the actual operations of the trust.
Generally, liquidating trusts are treated as trusts for U. tax purposes, but only as long as the trust’s business activities do not become so big as to obscure the trust’s liquidating function. §301.7701-4(d) will treat the following entities as liquidating trusts: bondholders’ protective committees, voting trusts, and other agencies formed to protect the interests of security holders during insolvency, bankruptcy, or corporate reorganization proceedings are analogous to liquidating trusts. The powers of trustees deserve special attention in liquidating trusts.
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