Liquidating trust investment company act

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.

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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.

The objective of a liquidating trust is to help expedite the liquidation of the entity, and allow the owners to recognize gain or loss and to receive proceeds in an orderly manner.

In addition, it may be prudent for the fund manager to set aside certain cash reserves before making final distributions to the fund owners.

The trustee takes control of the newly formed liquidating trust.

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.A business trust is either treated as a corporation or partnership for federal income tax purposes.Tax treatment of a liquidating distribution from a corporation 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 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.Such agreement provides for trustee duties, compensation of trustees, and governance as well as distributions and other administrative matters.

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