Timing/Calculation of Distributions
Question #2: Is the money that is distributed taxable?
The Second Amended Joint Chapter 11 Plan of Liquidation Filed by the Chapter 11 Trustee and the Official Committee of Unsecured Creditors in the Chapter 11 cases of DBSI, Inc. and its affiliated Debtors (“the Plan”) was confirmed on October 26, 2010 (see Delaware Bankruptcy Court Docket #5923). You previously should have received a beneficiary letter that included the value of your interest in the applicable Liquidating Trust. (This beneficiary letter was sent separately from the Grantor Tax Letters (a/k/a K-1 Equivalent) that reports your annual share of income and/or loss as a beneficiary of the applicable Liquidating Trust.) If your investment was not held by an IRA (or other nontaxable trust) you would have received a tax deduction for the difference between your investment and the amount in your beneficiary letter. The value in the beneficiary letter would become your new tax basis in your investment. You should not have to pay taxes on the funds received until you have recovered that basis in your investment. Each person’s tax situation is different, so please contact your tax advisor to determine if and/or how this information may apply to your particular circumstances. Also, please see below for additional Tax Information, and note that your basis in your beneficiary interest is adjusted for income or loss passed through to you by the trust.  See FAQ “What is a Grantor Letter” for additional information.