SECTION 5. COMMENTS

RECEIVED

.01 The Treasury Department and the IRS received comments addressing arrangements organized as trusts under § 301.7701-4(c) and Rev. Rul. 2004-86 that hold rental real property. The commenters reported that many of these arrangements and their tenants are experiencing financial hardship due, directly or indirectly, to the COVID-19 emergency.

.02 These comments indicate that, in order to respond appropriately to these challenges, trustees may find it necessary to—

(1) Respond to the COVID-19 financial hardship of their tenants by modifying the trust’s real property leases with the tenants to defer or waive rent payments;

(2) Request relief under various forbearance programs with respect to debt service on the mortgage loan secured by the trust’s real property; and

(3) Accept additional cash contributions in order to avoid default on the trust’s loan obligations, to satisfy lender demands on which receiving a loan modification may be contingent, to pay trust expenses, or to bolster trust reserves for the payment of expenses and loan payments. Depending on the circumstances for a particular trust, these contributions may come pro rata from current trust interest holders, non-pro rata from these current interest holders, or from outside investors.