IRS extends the period for a commercially reasonable liquidation

Plain-English summary

A taxpayer asked the IRS to supplement an earlier private letter ruling governing a plan to liquidate a group of debtors. It represented that it had consistently pursued liquidation as quickly as commercially reasonable, but could not dispose of the remaining assets and resolve disputed claims within the original period. Debtors that had completed distributions had recognized cancellation-of-debt income, and the group had accounted for that income and related tax-attribute reductions. The IRS ruled that the new facts would not disturb the prior ruling and that the plan would continue to be respected as a liquidation for an additional number of years that was redacted from the public release. The ruling depended on the earlier representations remaining in effect and continued compliance with the plan trust's terms.

Ruling snapshot

• Question: Will an extended liquidation period preserve the prior ruling and the treatment of the plan as a plan of liquidation?
• Outcome: approved (extension granted for a redacted number of years)
• Key authorities: the prior private letter ruling; IRC § 6110(k)(3)

Full text (IRS public release)

 Internal Revenue Service                                           Department of the Treasury
                                                                    Washington, DC 20224

 Number: 202017023                                                  Third Party Communication: None
 Release Date: 4/24/2020                                            Date of Communication: Not Applicable
 Index Numbers: 61.22-00, 108.00-00,
               331.04-00, 382.00-00                                 Person To Contact:
                                                                    --------------------, ID No. -----------------
                                                                    Telephone Number:
 ----------------------                                             --------------------
 -----------------------------                                      Refer Reply To:
 ------------------------------------------                         CC:CORP:B03
 -----------------------                                            PLR-117203-19
 --------------------------------                                   Date:
                                                                    January 14, 2020




LEGEND


Taxpayer                   =                  -------------------------------------------------------
--------------------------------------------------------------------
----------------------------------------------------------------------------

Date A                     =                  -------------------

(i)                        =                  --

Dear ----------------:

This letter responds to your authorized representative’s July 22, 2019, request that we
supplement our letter ruling dated Date A (the “Prior PLR”). Capitalized terms not
defined in this ruling have the meanings assigned to them in the Prior PLR.


                                    Supplemental Representations

      (a) At all times since the issuance of the Prior PLR, Taxpayer has acted with the
          primary purpose of liquidating the Debtors in a commercially reasonable manner
          as quickly as possible under the facts and circumstances.

      (b) It is not possible to liquidate the Debtors remaining assets and resolve their
          disputed claims in a commercially reasonable manner within the liquidation
          period contemplated in the Prior Letter.

PLR-117203-19                                 2

   (c) The primary purpose of the requested extension is to continue the liquidation of
       the Debtors in a commercially reasonable manner as quickly as possible under
       the facts and circumstances.

   (d) Each Debtor that has distributed all of its assets pursuant to the Plan has
       realized any COD income, and the Taxpayer Group has taken such COD income
       and any corresponding attribute reduction into account for federal income tax
       purposes.

                                 Supplemental Rulings

Based on the information submitted and representations made in the Prior PLR, and
this PLR, (“the Supplemental PLR”) we rule as follows:

(1) The facts and representations in the Supplemental PLR will not adversely affect the
    Prior PLR, which will remain in full force and effect.

(2) The Plan will continue to be respected as a plan of liquidation for an additional
    period of (i) years beyond the period contemplated in the Prior PLR.

                                Limitations and Caveats

       The foregoing rulings are based on the following: (1) all representations in the
prior PLR, except as modified by the Supplemental PLR, remain in full force and effect;
(2) the Taxpayer Group adheres to all terms and conditions of the Plan Trust and the
Plan Trust remains in effect.

       Additionally, no opinion is expressed about the tax treatment of the Plan under
other provisions of the Code or regulations or the tax treatment of any effects resulting
from, the Plan that are not specifically covered by the above rulings.

                                 Procedural Statements

       This ruling is directed only to the Taxpayer Group. Section 6110(k)(3) of the
Code provides that it may not be used or cited as precedent. In accordance with the
Power of Attorney on file with this office, copies of this letter are being sent to your
authorized representatives.

PLR-117203-19                               3


       A copy of this letter must be attached to any income tax return to which it is
relevant. Alternatively, taxpayers filing their returns electronically may satisfy this
requirement by attaching a statement to their return that provides the date and control
number (PLR-117203-19) of this letter ruling.



                                         Sincerely,


                                         Mark J. Weiss
                                         Mark J. Weiss
                                         Branch Chief, Branch 2
                                         Office of Associate Chief Counsel (Corporate)




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