FEDERAL INCOME TAX CONSEQUENCES
Question #2: How is the Liquidating Trust generally treated for federal income tax purposes?
Each of the DBSI Real Estate Liquidating Trust and the DBSI Liquidating Trust is intended to qualify as a “liquidating trust” as described in Treasury Regulations Section 301.7701-4(d) which is generally treated as a “grantor trust” for federal income tax purposes. Under U.S. federal income tax laws, a grantor trust is disregarded, and the grantors - the beneficiaries of the Liquidating Trust - are treated as if they directly owned undivided interests in the trust’s assets.  This means that beneficiaries are required to report their share of net income or loss from the trust each year. Your share of gain or loss will adjust your basis in your beneficiary interest for tax purposes. Again, please consult your individual tax advisor for how the tax rules will apply to your particular situation.