G reit liquidating trust grantor letter
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.
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.
Conclusion As noted, the use of a liquidating trust may be a cost efficient method to liquidate certain assets.
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.
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.
A partnership generally does not recognize gain or loss because of distributions it makes to partners.
The fair value of the contribution to the liquidating trust would represent the new owner's basis in the liquidating trust.