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USC Title 26 enacted through 2008

§ 643. Definitions applicable to subparts A, B, C, andD

 
(a)
Distributable net income
 
For purposes of this part, the term "distributable net income" means, with respect to any taxable year, the taxable income of the estate or trust computed with the following modifications -
 
(1)
Deduction for distributions
 
No deduction shall be taken under sections 651 and 661 (relating to additional deductions).
 
(2)
Deduction for personal exemption
 
No deduction shall be taken under section 642(b) (relating to deduction for personal exemptions).
 
(3)
Capital gains and losses
 
Gains from the sale or exchange of capital assets shall be excluded to the extent that such gains are allocated to corpus and are not (A) paid, credited, or required to be distributed to any beneficiary during the taxable year, or (B) paid, permanently set aside, or to be used for the purposes specified in section 642(c). Losses from the sale or exchange of capital assets shall be excluded, except to the extent such losses are taken into account in determining the amount of gains from the sale or exchange of capital assets which are paid, credited, or required to be distributed to any beneficiary during the taxable year. The exclusion under section 1202 shall not be taken into account.
 
(4)
Extraordinary dividends and taxable stock dividends
 
For purposes only of subpart B (relating to trusts which distribute current income only), there shall be excluded those items of gross income constituting extraordinary dividends or taxable stock dividends which the fiduciary, acting in good faith, does not pay or credit to any beneficiary by reason of his determination that such dividends are allocable to corpus under the terms of the governing instrument and applicable local law.
 
(5)
Tax-exempt interest
 
There shall be included any tax-exempt interest to which section 103 applies, reduced by any amounts which would be deductible in respect of disbursements allocable to such interest but for the provisions of section 265 (relating to disallowance of certain deductions).
 
(6)
Income of foreign trust
 
In the case of a foreign trust -
 
(A)
There shall be included the amounts of gross income from sources without the United States, reduced by any amounts which would be deductible in respect of disbursements allocable to such income but for the provisions of section 265(a)(1) (relating to disallowance of certain deductions).
 
(B)
Gross income from sources within the United States shall be determined without regard to section 894 (relating to income exempt under treaty).
 
(C)
Paragraph (3) shall not apply to a foreign trust. In the case of such a trust, there shall be included gains from the sale or exchange of capital assets, reduced by losses from such sales or exchanges to the extent such losses do not exceed gains from such sales or exchanges.
 
(7)
Abusive transactions
 
The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this part, including regulations to prevent avoidance of such purposes.
 
If the estate or trust is allowed a deduction under section 642(c), the amount of the modifications specified in paragraphs (5) and (6) shall be reduced to the extent that the amount of income which is paid, permanently set aside, or to be used for the purposes specified in section 642(c) is deemed to consist of items specified in those paragraphs. For this purpose, such amount shall (in the absence of specific provisions in the governing instrument) be deemed to consist of the same proportion of each class of items of income of the estate or trust as the total of each class bears to the total of all classes.
 
(b)
Income
 
For purposes of this subpart and subparts B, C, and D, the term "income", when not preceded by the words "taxable", "distributable net", "undistributed net", or "gross", means the amount of income of the estate or trust for the taxable year determined under the terms of the governing instrument and applicable local law. Items of gross income constituting extraordinary dividends or taxable stock dividends which the fiduciary, acting in good faith, determines to be allocable to corpus under the terms of the governing instrument and applicable local law shall not be considered income.
 
(c)
Beneficiary
 
For purposes of this part, the term "beneficiary" includes heir, legatee, devisee.
 
(d)
Coordination with back-up withholding
 
Except to the extent otherwise provided in regulations, this subchapter shall be applied with respect to payments subject to withholding under section 3406 -
 
(1)
by allocating between the estate or trust and its beneficiaries any credit allowable under section 31(c) (on the basis of their respective shares of any such payment taken into account under this subchapter),
 
(2)
by treating each beneficiary to whom such credit is allocated as if an amount equal to such credit has been paid to him by the estate or trust, and
 
(3)
by allowing the estate or trust a deduction in an amount equal to the credit so allocated to beneficiaries.
 
(e)
Treatment of property distributed in kind
 
(1)
Basis of beneficiary
 
The basis of any property received by a beneficiary in a distribution from an estate or trust shall be -
 
(A)
the adjusted basis of such property in the hands of the estate or trust immediately before the distribution, adjusted for
 
(B)
any gain or loss recognized to the estate or trust on the distribution.
 
(2)
Amount of distribution
 
In the case of any distribution of property (other than cash), the amount taken into account under sections 661(a)(2) and 662(a)(2) shall be the lesser of -
 
(A)
the basis of such property in the hands of the beneficiary (as determined under paragraph (1)), or
 
(B)
the fair market value of such property.
 
(3)
Election to recognize gain
 
(A)
In general
 
In the case of any distribution of property (other than cash) to which an election under this paragraph applies -
 
(i)
paragraph (2) shall not apply,
 
(ii)
gain or loss shall be recognized by the estate or trust in the same manner as if such property had been sold to the distributee at its fair market value, and
 
(iii)
the amount taken into account under sections 661(a)(2) and 662(a)(2) shall be the fair market value of such property.
 
(B)
Election
 
Any election under this paragraph shall apply to all distributions made by the estate or trust during a taxable year and shall be made on the return of such estate or trust for such taxable year.
 
Any such election, once made, may be revoked only with the consent of the Secretary.
 
(4)
Exception for distributions described in section 663(a)
 
This subsection shall not apply to any distribution described in section 663(a).
 
(f)
Treatment of multiple trusts
 
For purposes of this subchapter, under regulations prescribed by the Secretary, 2 or more trusts shall be treated as 1 trust if -
 
(1)
such trusts have substantially the same grantor or grantors and substantially the same primary beneficiary or beneficiaries, and
 
(2)
a principal purpose of such trusts is the avoidance of the tax imposed by this chapter.
 
For purposes of the preceding sentence, a husband and wife shall be treated as 1 person.
 
(g)
Certain payments of estimated tax treated as paid by beneficiary
 
(1)
In general
 
In the case of a trust -
 
(A)
the trustee may elect to treat any portion of a payment of estimated tax made by such trust for any taxable year of the trust as a payment made by a beneficiary of such trust,
 
(B)
any amount so treated shall be treated as paid or credited to the beneficiary on the last day of such taxable year, and
 
(C)
for purposes of subtitle F, the amount so treated -
 
(i)
shall not be treated as a payment of estimated tax made by the trust, but
 
(ii)
shall be treated as a payment of estimated tax made by such beneficiary on January 15 following the taxable year.
 
(2)
Time for making election
 
An election under paragraph (1) shall be made on or before the 65th day after the close of the taxable year of the trust and in such manner as the Secretary may prescribe.
 
(3)
Extension to last year of estate
 
In the case of a taxable year reasonably expected to be the last taxable year of an estate -
 
(A)
any reference in this subsection to a trust shall be treated as including a reference to an estate, and
 
(B)
the fiduciary of the estate shall be treated as the trustee.
 
(h)
Distributions by certain foreign trusts through nominees
 
For purposes of this part, any amount paid to a United States person which is derived directly or indirectly from a foreign trust of which the payor is not the grantor shall be deemed in the year of payment to have been directly paid by the foreign trust to such United States person.
 
(i)
Loans from foreign trusts
 
For purposes of subparts B, C, and D -
 
(1)
General rule
 
Except as provided in regulations, if a foreign trust makes a loan of cash or marketable securities directly or indirectly to -
 
(A)
any grantor or beneficiary of such trust who is a United States person, or
 
(B)
any United States person not described in subparagraph (A) who is related to such grantor or beneficiary,
 
the amount of such loan shall be treated as a distribution by such trust to such grantor or beneficiary (as the case may be).
 
(2)
Definitions and special rules
 
For purposes of this subsection -
 
(A)
Cash
 
The term "cash" includes foreign currencies and cash equivalents.
 
(B)
Related person
 
(i)
In general
 
A person is related to another person if the relationship between such persons would result in a disallowance of losses under section 267 or 707(b). In applying section 267 for purposes of the preceding sentence, section 267(c)(4) shall be applied as if the family of an individual includes the spouses of the members of the family.
 
(ii)
Allocation
 
If any person described in paragraph (1)(B) is related to more than one person, the grantor or beneficiary to whom the treatment under this subsection applies shall be determined under regulations prescribed by the Secretary.
 
(C)
Exclusion of tax-exempts
 
The term "United States person" does not include any entity exempt from tax under this chapter.
 
(D)
Trust not treated as simple trust
 
Any trust which is treated under this subsection as making a distribution shall be treated as not described in section 651.
 
(3)
Subsequent transactions regarding loan principal
 
If any loan is taken into account under paragraph (1), any subsequent transaction between the trust and the original borrower regarding the principal of the loan (by way of complete or partial repayment, satisfaction, cancellation, discharge, or otherwise) shall be disregarded for purposes of this title.








Tax Code (Internal Revenue Code) Section Index


U.S. GAAP by Codification Topic
 
105 GAAP Hierarchy
105 GAAP History

205 Presentation of Financial Statements
205-20 Discontinued Operations
210 Balance Sheet
210-20 Offsetting
220 Comprehensive Income
225 Income Statement
225-20 Extraordinary and Unusual Items
230 Statement of Cash Flows
250 Accounting Changes and Error Corrections
260 Earnings per Share
270 Interim Reporting

310 Impairment of a Loan
320 Investment Securities
320 Other-Than-Temporary Impairments, FSP FAS 115-2
320-10-05 Overview of Investments in Other Entities
320-10-35 Reclassification of Investments in Securities
323-10 Equity Method Investments
323-30 Investments in Partnerships and Joint Ventures
325-20 Cost Method Investments
330 Inventory

340-20 Capitalized Advertising Costs
350-20 Goodwill
350-30 Intangibles Other than Goodwill
350-40 Internal-Use Software
350-50 Website Development Costs
360 Property, Plant and Equipment
360-20 Real Estate Sales

410 Asset Retirement and Environmental Obligations
420 Exit or Disposal Cost Obligations
450 Contingencies
450-20 Loss Contingencies
450-30 Gain Contingencies
480 Redeemable Financial Instruments

505-20 Stock Dividends, Stock Splits
505-30 Treasury Stock

605 SEC Staff Accounting Bulletin, Topic 13
605-25 Revenue Recognition - Multiple Element Arrangements

715-30 Defined Benefit Plans - Pension
718 Share-Based Payment
730 Research and Development
730-20 Research and Development Arrangements

805 Business Combinations
810 Consolidation
810 Noncontrolling Interests
810 Consolidation of Variable Interest Entities, SFAS 167

815 Derivatives and Hedging Overview

820 Fair Value Measurements
820 Fair value when the markets are not active, FSP FAS 157-4
825 Fair Value Option

830 Foreign Currency Matters
830-20 Foreign Currency Transactions
830-30 Translation of Financial Statements
835 Interest
835-20 Capitalization of Interest
835-30 Imputation of Interest

840 Leases
840-20 Operating Leases
840-30 Capital Leases
840-40 Sale-Leaseback Transactions
845 Nonmonetary Transactions

855 Subsequent Events
860-20 Sale of Financial Assets, SFAS 166
860-50 Servicing Assets and Liabilities, SFAS 156

985-20 Costs of software to be sold


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Tax Code (Internal Revenue Code) Section Index




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