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TITLE 26-IINTERNAL REVENUE CODE "5" preceding "preceding taxable years" in the first and third sentences and the last sentence reading "In the case of a foreign trust created by a United States person, this subsection shall apply to the preceding taxable years of the trust without regard to any provi- sion of the preceding sentences which would (but for this sentence) limit its application to the 5 preceding taxable years," Subsec. (b). Pub. L. 91-172 inserted "attributsble to the undistributed net Income" following "taxable year" in the second sentence and "attributable to such undistributed net income" preceding "shall be comput- ed" in the third sentence. Subsec. (c). Pub. L. 91-172 inserted "attributable to the undistributed net Income" preceding "multiplied by the ratio" in the second sentence and "attributable to such undistributed net income" preceding "shall be computed" in the third sentence. Subsec. (d). Pub. L. 91-172 added subsec. (d). 1962-Subsec. (a). Pub. L. 87-834 insei ted words "(other than a foreign trust created by a United States person)" following "In the case of a trust", and insert- ed sentence making this subsection applicable, in the case of a foreign trust created by a United States person, to the preceding taxable years of the trust without regard to any provision of the preceding sen- tences of this subsection which would (but for this sentence) limit its application to the 5 preceding tax- able years. Emc'rxvE DATE oF 1976 AMEDMENT Enactment of subsec. (e) by Pub. L. 94-455 applica- ble to distributions made in taxable years beginning after Dec. 31, 1975, see section 701(h) of Pub. L. 94- 455, set out as an Effective Date of 1976 Amendment note under section 667 of this title. EFscTxvE DATE OF 1969 AMENDMENT Amendment by Pub. L. 91-172 applicable to taxable years beginning after Dec. 31, 1968, except that for taxable years of a trust beginning before Jan. 1, 1970, first sentence of subsec. (a) not applicable and amount of accumulation distribution stated, see section 331(d)(1) and (2)(B) of Pub. L. 91-172, set out as an Ef- fective Date of 1969 Amendment note under section 665 of this title. EFcTIvE DATE or 1962 AMENDMENT Amendment by Pub. L. 87-834 applicable with re- spect to distributions made after Dec. 31, 1962, see sec- tion 7(j) of Pub. L. 87-834, set out as an Effective Date of 1962 Amendment note under section 643 of this title. SECTION REFERRED TO IN OTHER SECTIONS This section is ref en ed to in sections 665, 667, 668 of this title. § 667. Treatment of amounts deemed distributed by trust in preceding years (a) General rule The total of the amounts which are treated under section 666 as having been distributed by a trust in a preceding taxable year shall be in- cluded in the income of a beneficiary of the trust when paid, credited, or required to be dis- tributed to the extent that such total would have been included n the Income of such bene- ficiary under section 662(a)(2) (and, with re- spect to any tax-exempt interest to which sec- tion 103 applies, under section 662(b)) If such total had been paid to such beneficiary on the last day of such preceding taxable year. The tax imposed by this subtitle on a beneficiary for a taxable year in which any such amount Is included in his income shall be determined only as provided in this section and shall consist of the sum of- (1) a partial tax computed on the taxable income reduced by an amount equal to the total of nuch amounts, at the rate and in the manner as if this section had not been en- acted, (2) a partial tax determined as provided in subsection (b) of this section, and (3) in the case of a foreign trust, the inter- est charge determined as provided in section 668. (b) Tax on distribution (1) In general The partial tax imposed by subsection (a)(2) shall be determined- (A) by determining the number of preced- ing taxable years of the trust on the last day of which an amount is deemed under section 666(a) to have been distributed, (B) by taking from the 5 taxable years im- mediately preceding the year of the accu- mulation distribution the 1 taxable year for which the beneficiary's taxable income was the highest and the 1 taxable year for which his taxable income was the lowest, (C) by adding to the beneficiary's taxable income for each of the 3 taxable years re- maining after the app)ication of subpara- graph (B) an amount determined by divid- ing the amount deemed distributed under section 666 and required to be included in income under subsection (a) by the number of preceding taxable years determined under subparagraph (A), and (D) by determining the average increase in tax for the 3 taxable years referred to in subparagraph (C) resulting from the appli- cation of such subparagraph. The partial tax imposed by subsection (a)(2) shall be the excess (if any) of the average in- crease in tax determined under subparagraph (D), multiplied by the number of preceding taxable years determined under subpara- graph (A), over the amount of taxes deemed distributed to the beneficiary under sections 666(b) and (c). (2) Treatment of loss years For purposes of paragraph (1), the taxable income of the beneficiary for any taxable year shall be deemed not to be less than zero. (3) Certain preceding taxable years not taken into account For purposes of paragraph (1), if the amount of the undistributed net income deemed distributed in any preceding taxable year of the trust is less than 25 percent of the amount of the accumulation distribution di- vided by the number of preceding taxable years to which the accumulation distribution is allocated under section 666(a), the number of preceding taxable years of the trust with respect to which an amount is deemed distrib- uted to a beneficiary under section 666(a) shall be determined without regard to such year. (4) Effect of other accumulation distributions In computing the partial tax under para- graph (1) for any beneficiary, the income of such beneficiary for each of his prior taxable Page 47/1