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Liquidating trust

The Res Cap Liquidating Trust was established in December 2013 under the Second Amended Joint Chapter 11 Plan of Residential Capital, LLC, et al.

The Staff has generally noted the following characteristics with respect to liquidating trusts being granted no-action relief: While the Staff has granted no-action relief from Exchange Act requirements if the above requirements are met, it has also expressly denied relief in circumstances where the company requesting relief was not current with its required filings under the Exchange Act.

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The Staff’s underlying rationale in granting relief to liquidating trusts appears to be two-fold: (1) that compliance with the reporting obligations (including the cost of auditing annual financial statements and preparing and filing quarterly reports) of the Exchange Act would place an unreasonable financial and administrative burden on a liquidating trust and significantly reduce the amount of distributions to be made in respect of the beneficial interests; and (2) as the beneficial interests are not and will not be traded on the open market and the holders of the beneficial interests will receive at least annual financial reports from the trustee of the liquidating trust, there is no need for the general public to receive the type of information regarding the liquidating trust required under Sections 13 and 15(d) of the Exchange Act.

Liquidating trusts are common in today’s business environment and it is highly important to understand how they are taxed in the United States. First, it will focus on the trust’s documents, its stated purpose and the powers of the trustees.

One possible component of a bankruptcy reorganization or liquidation is a liquidating trust.