Liquidating distribution capital gain


When the Internal Revenue Code refers to "income," the reference is to the definition of FAI in the governing instrument and applicable local law (Sec. If the governing instrument is silent as to the treatment of capital gains for FAI purposes, the fiduciary should look to applicable local law.

Currently, 46 states and the District of Columbia have adopted some form of the 1997 UPAIA (see RIA Checkpoint, "List of States Following One of the Revised Uniform Principal and Income Acts," Table T309).

Sounds as though it would long-term gain reportable in Part II.

You can order IRS forms and instructions by calling 800.829.3676 or visit gov.

If you do not receive such a statement, you report the distribution as an ordinary dividend. A nondividend distribution reduces the basis of your stock.

Assets are distributed based on the priority of various parties’ claims, with a trustee appointed by the Department of Justice overseeing the process.

The most senior claims belong to secured creditors, who have collateral on loans to the business.

Tax advisers should understand the options available under state law, including the "power to adjust" and "unitrust" provisions, and how those provisions intersect with Regs. FAI, also referred to as trust accounting income, is determined by the governing instrument and applicable local law.

Although it is not a tax concept, FAI is important in determining whether the fiduciary or beneficiaries pay tax on the trust's income.

Three states (Georgia, Illinois, and Louisiana) currently operate under the 1962 UPAIA.

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