Rev. Proc. 82-58

Section 1. Purpose

The purpose of this revenue procedure is to modify and supersede Rev. Proc. 80-54, 1980-2 C.B. 848, and Rev. Proc. 81-51, 1981-2 C.B. 625, by specifying revised 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. Scope

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 assets 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 rules in 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 of the Internal Revenue Service for the issuance of advance rulings are outlined in Rev. Proc. 82-37, 1982-1 C.B. 491, and section 601.201 of the Statement of Procedural Rules (26 CFR section 601.201 (1980)). Careful attention to all of the requirements of these documents will also serve to minimize delays in processing requests for rulings.

Sec. 3. Changes

.01 Section 4.02, Operating Rules, of Rev. Proc. 80-54 is changed to provide a trust term of more than 3 years in the case of certain installment obligations.

.02 Section 4.07 is changed to provide that the trust may retain an amount reasonably required to meet claims and contingent liabilities.

Sec. 4. General 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 or determinable termination date that is generally not more than three years from the date of creation of the trust and that is reasonable based on all the facts and circumstances.

If the trust contains installment obligations, such as those described in section 453(h) of the Code, that are payable over a period that ends more than three years after the date of creation of the trust, the trust term, with respect to those obligations only, may extend for a period that is reasonably necessary to collect and distribute installments on the obligations. For purposes of the preceding sentence, the ruling request should ordinarily contain representations that the trustee annually will compile and disseminate to known shareholders all available tax return information with respect to interest (stated or unstated) and otherwise necessary or useful in reporting under the installment method.

.03 In the case of a trust created incident to a corporate liquidation, (1) the trustee is selected by the shareholders of record or a court of competent jurisdiction, and (2) if the trust is to hold assets for unlocated shareholders, due notice has been given to such shareholders in accordance with local law. In this regard, see Rev. Rul. 80-177, 1980-2 C.B. 109, which holds that a shareholder who was notified was in constructive receipt of a liquidating distribution when the distribution first became payable.

.04 The investment powers of the trustee are limited to powers to invest in demand and time deposits in banks or savings institutions, or temporary investments such as short-term certificates of deposit or Treasury bills.

.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 represents 80 percent or more of the stock of such issuer and does not receive transfers of any general or limited partnership interests.

.07 The trust is required to distribute at least annually to known shareholders any proceeds from the sale of assets or income from investments. The trust may retain a reasonable amount of proceeds or income to meet claims and contingent liabilities.

.08 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. 5. Inquiries

Inquiries regarding this revenue procedure should refer to its number and should be addressed to the Associate Chief Counsel (Technical), Attention: CC:IND:I, Internal Revenue Service, Washington, D.C. 20224.

Effect on Other Revenue Procedures

Rev. Proc. 80-54 and Rev. Proc. 81-51 are modified and superseded.