WMI liquidating trust disbursement - how to enter

[bhodge]

I received a final disbursement from WMI liquidating trust. The liquidating trust was set up years ago for security owners when Washington Mutual  went into bankruptcy. "For federal income tax purposes each beneficiary is considered an owner of a portion of the trust."

I have received a "beneficiary tax information letter" due to the payment I received. It lists, Income, Deductions,(both negligible) Distribution and Net Operating loss (about 1/3 of distribution). "Taxation of Disputed Ownership Funds is a 'highly technical area of tax law" and it gives no guidance on reporting.

This was the Washington Mutual Liquidating Trust. There was a huge number of investors involved. Anyone know how to report this? 

Thanks

[Anonymous_]

You might want to read through the posts in the thread below.

Re: How do I enter information from a Grantor Lett... - Page 2 (intuit.com)

[bhodge]

Fast response Thanks. Seems like one option. This doesn't say it's a grantor letter but I guess it's similar. Will look more thanks. 

[Anonymous_]

You are welcome @bhodge.

However, you apparently received a grantor letter (i.e., this is a grantor trust, technically) since it is stated:

""For federal income tax purposes each beneficiary is considered an owner of a portion of the trust.""

[bhodge]

Yes. I found this somewhere online "The intent of the Plan and Trust Agreement was that the Liquidating Trust qualify as a grantor trust" It wasn't describing wmi but seems to apply. 

So I think I could report the distribution as a capital gain in the stock sales section and report the NOL as a cost. I think I should get the benefit of the nol. This would be long term. The bankruptcy was in 2008, Crazy it's finally done in 2021.

Thanks for your help

[bhodge]

Or create a k1? I'm confused again.

[Anonymous_]

You are probably better off creating a K-1 and selecting a partnership as the entity (as opposed to a trust/estate).

Also, you would not have an NOL unless you were materially participating in the business (which is highly unlikely).

[bhodge]

Oh well. Thanks for the help. 

[bhodge]

Still working here.

I'm on form 1041 filing a k1.

I have a "total cash distribution paid in 2020 - final distribution.

Is this "ordinary business income"?  

And the tax letter states that the unused NOL carryover is allocated among claimants. This is from a DCR disputed Claim Reserve. It's a final disbursement. I think I use it on Line 11 D – Final year Deductions - Net operation loss carryover - regular tax .

Thanks

[Anonymous_]

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@bhodge wrote:

This is from a DCR disputed Claim Reserve. It's a final disbursement. I think I use it on Line 11 D – Final year Deductions

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Yes. In that instance, that would be where you would enter that figure.

[bhodge]

Thanks!