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First consideration is given to the consequences of business trust classification followed by a consideration of the rules used to determine whether a trust will be considered a business trust.

The applicable legal standard distinguishing an ordinary trust from a business trust has remained relatively static (albeit vague) since the ancient origins of our federal tax system.

No doubt this is attributable to the fact that after that date, a failed liquidating trust will merely be treated as an unincorporated business entity and thus as a partnership (two or more beneficiaries) or disregarded entity (grantor trust status if single beneficiary).

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