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 Treasury and IRS Address Exchanges of Interests in Delaware Statuatory Trust



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The Treasury Department and the Internal Revenue Service today issued a revenue ruling regarding the federal tax classification of a multi-owner Delaware statutory trust formed to hold rental real property.   The ruling concludes that such a trust is classified, for federal tax purposes, as a partnership or a corporation if the trustee has the power to dispose of the property and acquire new property, renegotiate or enter into leases, renegotiate or refinance debt, invest cash to profit from market fluctuations, or make more than non-structural modifications to the property.   If, instead, the trustee's activities are limited to the collection and distribution of income and the trust has a single class of interests, then the trust is respected as a trust.   In such a case, interests in the trust may be qualifying property in a tax-deferred like-kind exchange if the other requirements for such treatment are satisfied.  









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