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Liquidating fund

in 1997, and was published by Lens Work Magazine in 2003.

In a bankruptcy, a liquidating trust may be formed whereby certain assets are placed in a trust for the benefit of creditors who may have certain claims against those assets.

A liquidating trust may also be an effective method for a fund manager to wind down a fund without having a significant role in the liquidation.

Certain tax-exempt funds, such as municipal-bond funds, may allow you to lower your overall tax risk during the life of your investment.

The IRS, and certain states, typically don't levy taxes on a portion or all of your dividends received from a municipal-bond fund.

A liquidating trust is a new legal entity that becomes successor to the liquidating fund.

The remaining assets and liabilities are transferred into the newly formed trust and the former owners of the liquidating fund become unit holders or beneficiaries of the trust.

Capital gains and sales remain within the the tax-deferred account and do not face taxation until you start making withdrawals.