Federal Tax Day - Current, L.3, Code Sec. 468B: Trust Held to be Qualified Settlement Fund and More (LTR 202624002), (Jun 15, 2026)

A trust (T1) was held to be a qualified settlement fund under Reg. §1.468B-1(c). T1 was formed by multiple entities following court cases. The cases involved claims for public nuisance, unfair trade practices laws, racketeering and more. Said entities later filed voluntary petitions for relief. This led to T1’s creation for resolving said liabilities. T1 satisfied the requirements under Reg. §1.468B-1(c).

Secondly, T1 could exclude the transfer of funds from its modified gross income. The transfers were (1) used to resolve liabilities; and (2) according to a resolution plan. Finally, T1’s income was excludable from gross income under Code Sec. 115. T1 exercised an essential governmental function. T1’s income accrued to a political or government entity.

IRS Letter Ruling 202624002