Where the fiduciary adjustment, as defined in section 119.1 of this Part, includes New York State modifications which consist of or relate to items of income, gain, loss or deduction which are charged or credited to corpus or principal for
(2) Where the fiduciary adjustment, as defined in section 119.1 of this Part, includes New York State modifications which consist of or relate to items of income, gain, loss or deduction which are charged or credited to corpus or principal for probate or trust accounting purposes, under local law or under the governing instrument, or items in which income beneficiaries do not share pro rata, the fiduciary, subject to subdivision (b) of this section, in lieu of determining the share of the fiduciary adjustment under section 119.2 of this Part, may attribute the respective shares of an estate or trust and its beneficiaries in such fiduciary adjustment:
(i)by attributing the modifications described in section 119.1 of this Part to the estate, trust or beneficiaries, as the case may be, in the manner in which the items of income, gain, loss or deduction which give rise to such modifications ar#
(i) by attributing the modifications described in section 119.1 of this Part to the estate, trust or beneficiaries, as the case may be, in the manner in which the items of income, gain, loss or deduction which give rise to such modifications are attributed to the estate, trust or beneficiaries under local law or the governing instrument; and
(ii)by allocating the remainder of the modifications which comprise the fiduciary adjustment in accordance with subdivision (a) or (b) of section 119.2 of this Part.#
(ii) by allocating the remainder of the modifications which comprise the fiduciary adjustment in accordance with subdivision (a) or (b) of section 119.2 of this Part. Those modifications, or portions thereof, which are not includible in the New York fiduciary adjustment in accordance with the provisions of paragraph (c)(1) of section 119.1 of this Part must be attributed to the estate or trust in determining its New York taxable income regardless of whether an alternate method provided by this section is used by the fiduciary.