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TITLE 26-INTERNAL REVENUE CODE provided in the preceding sentence, there shall be included in the gross income of the beneficiary an amount which bears the same ratio to distributable net income (reduced by the amounts specified in (A)) as the other amounts properly paid, credited or required to be distributed to the beneficiary bear to the other amounts properly paid, credited, or required to be distributed to all beneficiaries. (b) Character of amounts The amounts determined under subsection (a) shall have the same character in the hands of the beneficiary as in the hands of the estate or trust. For this purpose, the amounts shall be treated as consisting of the same proportion of each class of items entering into the computa- tion of distributable net income as the total of each class bears to the total distributable net income of the estate or trust unless the terms of the governing instrument specifically allo- cate different classes of income to different beneficiaries. In the application of the preced- ing sentence, the items of deduction entering into the computation of distributable net income (including the deduction allowed under section 642(c)) shall be allocated among the items of distributable net income in accordance with regulations prescribed by the Secretary. In the application of this subsection to the amount determined under paragraph (1) of sub- section (a), distributable net income shall be computed without regard to any portion of the deduction under section 642(c) which is not at- tributable to income of the taxable year. (c) Different taxable years If the taxable year of a beneficiary is differ- ent from that of the estate or trust, the amount to be included in the gross income of the bene- ficiary shall be based on the distributable net income of the estate or trust and th6 amounts properly paid, credited, or required to be dis- tributed to the beneficiary during any taxable year or years of the estate or trust ending within or with his taxable year. (Aug. 16, 1954, ch. 736, 68A Stat. 220; Oct. 4, 1976, Pub. L. 94-455, title XIX, § 1906(b)(13)(A), 90 Stat. 1834.) AMENDmENTS 1976--Subsec. (b). Pub. L. 94-455 struck out "or his delegate" following "Secretary". CRoss RzmrxNcEs Computation of deduction for capital gains in cases of estate or trust, see section 1202 of this title. Inclusion of amounts in gross income of beneficiaries of trusts distributing current income only, see section 652 of this title. SECTION REMURE TO IN OTMx SECTIONS This section is referred to in sections 57, 116, 642, 663, 667, 677, 678, 1202 of this title. § 663. Special rules applicable to sections 661 and 662 (a) Exclusions There shall not be included as amounts fall- ing within section 661(a) or 662(a)- (1) Gifts, bequests, etc. Any amount which, under the terms of the governing instrument, is properly paid or credited as a gift or bequest of a specific sum of money or of specific property and which is paid or credited all at once or in not more than 3 installments. For this purpose an amount which can be paid or credited only from the income of the estate or trust shall not be considered as a gift or bequest of a spe- cific sum of money. (2) Charitable, etc., distributions Any amount paid or permanently set aside or otherwise qualifying for the deduction pro- vided in section 642(c) (computed without regard to sections 508(d), 681, and 4948(c)(4)). (3) Denial of double deduction Any amount paid, credited, or distributed in the taxable year, if section 651 or section 661 applied to such amount for a preceding tax- able year of an estate or trust because cred- ited or required to be distributed in such pre- ceding taxable year. (b) Distributions in first sixty-five days of taxable year (1) General rule If within tne first 65 days of any taxable year of a trust, an amount is properly paid or credited, such amount shall be considered paid or credited on the last day of the preced- ing taxable year. (2) Limitation Paragraph (1) shall apply with respect to any taxable year of a trust only if the fidu- ciary of such trust elects, in such manner and at such time as the Secretary prescribes by regulations, to have paragraph (1) apply for such taxable year. (c) Separate shares treated as separate trusts For the sole purpose of determining the amount of distributable net income in the ap- plication of sections 661 and 662, in the case of a single trust having more than one beneficia- ry, substantially separate and independent shares of different beneficiaries in the trust shall be treated as separate trusts. The exis- tence of such substantially separate and inde- pendent shares and the manner of treatment as separate trusts, including the application of subpart D, shall be determined in accordance with regulations prescribed by the Secretary. (Aug. 16, 1954, ch. 736, 68A Stat. 222; Dec. 30, 1969, Pub. L. 91-172, title I, § 101(j)(17), title III, § 331(b), 83 Stat. 528, 598; Oct. 4, 1976, Pub. L. 94-455, title XIX, § 1906(b)(13)(A), 90 Stat. 1834.) AmENDMzNTS 1976-Subsecs. (b)(2), (c). Pub. L. 94-455 struck out "or his delegate" following "secretary". 1969-Subsec. (a)(2). Pub. L. 91-172. § 101(J)(17), sub- stituted "sections 508(d), 681, and 4948(c)(4)", for "sec- tion 681". Subsec. (b)(2). Pub. L. 91-172, § 331(b), incorporated existing provisions of subpar. (C) of former first sen- tence making subsec. (b) applicable only to a trust where the fiduciary elected to have the subsec. apply and part of former second sentence making the u'lec- tion applicable in accordance with prescribed relfula- tions; substituted provisions for regulations to spell out manner and time of election for part of former second sentence requiring the election to be male not later than the time prescribed by law for filifig the return for the year, including any extension; and omit- ted: subpars. (A) and (B) of former first sentence § 663 Page 46