Rev. Proc. 79-1
Rev. Proc. 79-1; 1979-1 C.B. 481
- Cross-Reference
26 CFR 601.201: Rulings and determination letters.
(Also Part I, Section 7701; 301.7701-4.)
- Code Sections
- LanguageEnglish
- Tax Analysts Electronic Citationnot available
Modified and Superseded by Rev. Proc. 80-54
Section 1. Purpose.
The purpose of this Revenue Procedure is to specify the conditions that must be present before the Internal Revenue Service will consider issuing advance rulings concerning the classification of organizations as liquidating trusts under section 301.7701-4 of the Procedure and Administration Regulations.
Sec. 2. Background.
The operating rules published in this Revenue Procedure are intended solely to assist taxpayers and their representatives in preparing ruling requests. These operating rules do not define, as a matter of law, the circumstances under which an organization will be classified as a liquidating trust for federal income tax purposes. That determination can be made only after examination of all the facts and circumstances in connection with the operation and activities of the trust. An organization will be considered a liquidating trust if it is organized for the primary purpose of liquidating and distributing assests transferred to it, and if its activities are all reasonably necessary to, and consistent with, the accomplishment of that purpose. 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.
A ruling requested under this Revenue Procedure will usually be issued if the operating rules in Section 3 of this Revenue Procedure and the pertinent provisions of the Internal Revenue Code, Income Tax Regulations, revenue rulings and other revenue procedures are complied with.
The authority and general procedures of the National Office and the Offices of the District Directors of the Internal Revenue Service for the issuance of advance rulings and determination letters are outlined in Rev. Proc. 72-3, 1972-1 C.B. 698, and section 601.201 of the Statement of Procedural Rules (26 CFR section 601. 201 (1977)). See also Rev. Proc. 72-9, 1972-1 C.B. 718. Careful attention to all of the requirements of these documents will also serve to minimize delays in processing requests for rulings.
Sec. 3. Operating Rules.
A ruling generally will be issued that an organization is classified as a liquidating trust if the following conditions are met:
01. The trust is organized for the primary purpose of liquidating the assets transferred to it with no objective to continue or engage in the conduct of a trade or business and its governing instrument so provides.
.02 The trust instrument contains a fixed termination date that is not more than three years from the date of creation of the trust and that is reasonable based on all the facts and circumstances.
.03 In the case of a trust created incident to a corporate liquidation, the trustee is selected by the shareholders of record or a court of competent jurisdiction.
.04 The investment powers of the trustee are limited to demand and time deposits in federally insured banks or savings institutions, or short-term certificates of deposit.
.05 The trust does not receive transfers of any listed stocks or securities, any readily-marketable assets or any operating assets of a going business. The trust does not receive or retain cash in excess of a reasonable amount to meet claims and contingent liabilities.
.06 The trust does not receive transfers of any unlisted stock of a single issuer that exceeds 20 percent of the stock of such issuer and does not receive transfers of any general or limited partnership interests.
.07 In the case of a trust created incident to a corporate liquidation, the trust does not receive more than 20 percent of the total net assets of the liquidating corporation.
.08 The trustee is required to distribute at least semi-annually to known shareholders any proceeds from the sale of assets or income from investments.
.09 The ruling request contains representations that the trustee will make continuing efforts to dispose of the trust assets, make timely distributions, and not unduly prolong the duration of the trust.
Sec. 4. Inquiries.
Inquiries regarding this Revenue Procedure should refer to its number and should be addressed to the Assistant Commissioner (Technical), Attention: T:I:I, Internal Revenue Service, Washington, D.C. 20224.
- Cross-Reference
26 CFR 601.201: Rulings and determination letters.
(Also Part I, Section 7701; 301.7701-4.)
- Code Sections
- LanguageEnglish
- Tax Analysts Electronic Citationnot available