Believe Recent PLR is WaMu (I Do) Then This is The Closest I Have Seen To Confirmation of Assets Returning to Timely Signed Releasors Via Safe Harbor
POTENTIAL WaMu (PLR) Private Letter Ruling by IRS - Thanks to BP, Sunshine
THIS PROVES MY THOUGHT (if accurate-I say it is accurate) ON WMILT NOT DISSOLVED AND THERE WILL BE ASSETS PASSED THROUGH TO INVESTORS WHO SIGNED TIMELY RELEASES BY 3/2012
It warrants to dive a bit deeper into this interesting PLR request.
What prompted the PLR request:
- Continuing litigation would conceivably push the liquidating trust status past the IRS previously last approved 3 year extension.
What is the essence of the PLR request
(1) One year extension to be added to the end of the last approved 3 year extension.
(2) Request IRS ruling to AFFIRM the requesting TRUST'S tax status be that of a liquidating trust.
Relevant background info on trust vs a liquidating trust
(1) A liquidating trust is generally considered a grantor trust for tax purposes. The trust will be considered a liquidating trust with the primary purpose of liquidating its assets. Should the purpose of the entity change, such as to carry on a for-profit business, then the entity will no longer be considered a liquidating trust. Also, if the time period is unreasonably prolonged, the status of the entity may change from a liquidating trust.
(2) If a trust is created outside of Chapter 11 of the Bankruptcy Code, a private letter ruling may be requested if conditions of Revenue Procedure 82-58 are met.
Under Revenue Procedure 82-58, the IRS will issue a private letter ruling if 8 conditions are met. Such conditions include, among other things, that the primary purpose of the trust is liquidation of the assets with no objective of carrying on a trade or business and the trust agreement should contain a fixed or determinable termination date. That term generally should not exceed 3 years.
What can be said about the requested party
(1) It's a TRUST outside of Chapter 11 BK code.
(2) The Trust's primary purpose is to LIQUIDATE and DISTRIBUTE the liquidated assets to the recognized beneficiaries. ( I.e., No new business engagement planned)
(3) Drawing from past litigation experience, one additional year of extension to be added to the last 3 year approved extension on the liquidating tax status is requested as part of the planning process. (I.e., Best estimate on when litigation ends = ~ 2 year from PLR request)
(4) Ongoing litigation is the PRIMARY cause to prevent the TRUST from COMPLETING its "final" liquidating & distributing act prior to the deadline of the last approved 3 year extension.
(5) Trust's Distribution plan is to be completed prior to or by the end of the requested additional 1 year extension. (I.e., NOT over years, meaning no plan for continual partial distributions)
WMI Applicability test
- Superimpose WaMu on top of the above 5 points :
(a) Point 1 - WMI BK closure order signed on Dec 20, 2019 and PLR request was made on Jan 17, 2020 ( I.e., out of BK)
(b) Point 2 - BK Court recognized assets have all been distributed, Trust now focused/focuses on liquidating and distributing NON BK & BK -Remote assets.
(c) Points 3 to 5 - Plan of Action to be completed by TRUST and its "absolute" latest deadline abiding by the PLR ruling.
Conclusion
(1) Passes the WMI applicability test.
(2) From PLR, the TRUST clearly does not PLAN to go beyond the requested additional one-year extension from the last approved 3-year extension deadline. (I.e., Speed of the litigation is the rate-determining factor => the SOONER the litigation ends, the sooner the TRUST can complete its act as a liquidating trust). Otherwise, it could've requested up to another 3-year extension if so planned and needed.
(3) Attainment of Finality on litigation is the rate-determining step, controlling the timing on when liquidating can commence, follow by distributing.
(4) Completion of the Liquidating act is dependent on the readiness and/or timing set by the participating entities). ( I.e., Trust basically is more than ready to go once the litigation hurdles are cleared as the assets are in CASH and unliquidated assets, say, remaining active MBS securities).
Where is the TRUST
The TRUST is currently awaiting the counter participating entity to deliver the "counter" side of the liquidating act. (e.g. COOP)
AI
