Page 464

TITLE 26-INTERNAL REVENUE CODE (1) acquired by the trust from a decedent or which passed to a trust from a decedent (within the meaning of section 1014), or (2) acquired by a pooled income fund (as de- fined in section 642(c)(5)), or (3) acquired by a charitable remainder an- nuity trust (as defined in section 664(d)(1)) or a charitable remainder unitrust (as defined in sections 664(d)(2) and (3)), or (4) if the sale or exchange of the property occurred after the death of the transferor. (f) Special rule for installment sales If the trust elects to report income under sec- tion 453 on any sale or exchange to which sub- section (a) applies, under regulations prescribed by the Secretary- (1) subsection (a) shall be applied as if each installment were a separate sale or exchange of property to which such subsection applies, and (2) the term "includible gain" shall not in- clude any portion of an installment received by the trust after the death of the transferor. (Added Pub. L. 94-455, title VII, § 701(e)(1), Oct. 4, 1976, 90 Stat. 1578.) CODIFICATION Amendments of this section which were directed by section 1402(b)(1)(K), (2) of Pub. L. 94-455 could not be executed to the text since they purported to amend provisions of this section which were not enacted. E rIvE DATE Section applicable to transfers in trust made after May 21, 1976, see section 701(h) of Pub. L. 94-455, set out as an Effective of 1976 Amendment note under section 667 of this title. SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 641, 6103 of this title. SUBPART B-TRusTs WHICH DISTRIBUTE CURRENT INCOME ONLY Sec. 651. Deduction for trusts distributing current income only. 652. Inclusion of amounts in gross income of benefi- ciaries of trusts distributing current income only. SUBPART RqREDuis TO IN OTHER SECTIONS This subpart is referred to in section 671 of this title. § 651. Deduction for trusts distributing current income only (a) Deduction In the case of any trust the tc-ns of which- (1) provide that all of its income is required to be distributed currently, and (2) do not provide that any amounts are to be paid, permanently set aside, or used for the purposes specified in section 642(c) (relat- ing to deduction for charitable, etc., pur- poses), there shall be allowed as a deduction in com- puting the taxable income of the trust the amount of the income for the taxable year which is required to be distributed currently. This section shall not apply in any taxable year in which the trust distributes amounts other than amounts of income described in paragraph (1). (b) Limitation on deduction If the amount of income required to be dis- tributed currently exceeds the distributable net income of the trust for the taxable year, the de- duction shall be limited to the amount of the distributable net income. For this purpose, the computation of distributable net income shall not include items of income which are not in- cluded in the gross income of the trust and the deductions allocable thereto. (Aug. 16, 1954, ch. 736, 68A Stat. 219.) CRoss RDrEx±cEs Deduction for estates and trusts accumulating income or distributing copies, see section 661 of this title. SECTION RmRE TO IN OTHER SECTIONS This section is referred to in sections 57, 643, 652, 663 of this title. § 652. Inclusion of amounts In gross Income of bene- ficiaries of trusts distributing current income only (a) Inclusion Subject to subsection (b), the amount of income for the taxable year required to be dis- tributed currently by a trust described in sec- tion 651 shall be included in the gross income of the beneficiaries to whom the income is re- quired to be distributed, whether distributed or not. If such amount exceeds the distributable net income, there shall be included in the gross income of each beneficiary an amount which bears the same ratio to distributable net income as the amount of income required to be distrib- uted to such beneficiary bears to the amount of income required to be distributed to all benefi- ciaries. (b) Character of amounts The amounts specified in subsection (a) shall have the same character in the hands of the beneficiary as in the hands of the trust. For this purpose, the amounts shall be treated as consisting of the same proportion of each class of items entering into the computation of dis- tributable net income of the trust as the total of each class bears to the total distributable net income of the trust, unless the terms of the trust specifically allocate different classes of Income to different beneficiaries. In the appli- cation of the preceding sentence, the items of deduction entering into the computation of dis- tributable net income shall be allocated amorg the items of distributable net income in accor- dance with regulations prescribed by the Secre- tary. (c) Different taxable years If the taxable year of a beneficiary is differ- ent from that of the trust, the amount which the beneficiary is required to include in gross income in accordance with the provisions of this section shall be based upon the amount of income of the trust for any taxable year or years of the trust ending within or with his tax- able year. (Aug. 16, 1954, ch. 736, 68A Stat. 219; Oct. 4, 1976, Pub. L. 94-455, title XIX, § 1906(b)(13)(A), 90 Stat. 1834.) Page 464