Collapse to view only § 666. Accumulation distribution allocated to preceding years
- § 665. Definitions applicable to subpart D
- § 666. Accumulation distribution allocated to preceding years
- § 667. Treatment of amounts deemed distributed by trust in preceding years
- § 668. Interest charge on accumulation distributions from foreign trusts
- [§ 669. Repealed.
§ 665. Definitions applicable to subpart D
(a) Undistributed net income
For purposes of this subpart, the term “undistributed net income” for any taxable year means the amount by which distributable net income of the trust for such taxable year exceeds the sum of—
(1) the amounts for such taxable year specified in paragraphs (1) and (2) of section 661(a), and
(2) the amount of taxes imposed on the trust attributable to such distributable net income.
(b) Accumulation distribution
For purposes of this subpart, except as provided in subsection (c), the term “accumulation distribution” means, for any taxable year of the trust, the amount by which—
(1) the amounts specified in paragraph (2) of section 661(a) for such taxable year, exceed
(2) distributable net income for such year reduced (but not below zero) by the amounts specified in paragraph (1) of section 661(a).
For purposes of section 667 (other than subsection (c) thereof, relating to multiple trusts), the amounts specified in paragraph (2) of section 661(a) shall not include amounts properly paid, credited, or required to be distributed to a beneficiary from a trust (other than a foreign trust) as income accumulated before the birth of such beneficiary or before such beneficiary attains the age of 21. If the amounts properly paid, credited, or required to be distributed by the trust for the taxable year do not exceed the income of the trust for such year, there shall be no accumulation distribution for such year.
(c) Exception for accumulation distributions from certain domestic trusts
For purposes of this subpart—
(1) In general
(2) Qualified trust
For purposes of this subsection, the term “qualified trust” means any trust other than—
(A) a foreign trust (or, except as provided in regulations, a domestic trust which at any time was a foreign trust), or
(B) a trust created before March 1, 1984, unless it is established that the trust would not be aggregated with other trusts under section 643(f) if such section applied to such trust.
(d) Taxes imposed on the trust
For purposes of this subpart—
(1) In general
(2) Foreign trusts
(e) Preceding taxable year
For purposes of this subpart—
(1) In the case of a foreign trust created by a United States person, the term “preceding taxable year” does not include any taxable year of the trust to which this part does not apply.
(2) In the case of a preceding taxable year with respect to which a trust qualified, without regard to this subpart, under the provisions of subpart B, for purposes of the application of this subpart to such trust for such taxable year, such trust shall, in accordance with regulations prescribed by the Secretary, be treated as a trust to which subpart C applies.
(Aug. 16, 1954, ch. 736, 68A Stat. 223; Pub. L. 87–834, § 7(b), Oct. 16, 1962, 76 Stat. 985; Pub. L. 91–172, title III, § 331(a), Dec. 30, 1969, 83 Stat. 592; Pub. L. 92–178, title III, § 306(a), Dec. 10, 1971, 85 Stat. 524; Pub. L. 94–455, title VII, §§ 701(b), (c), (d)(2), (3), title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1577, 1578, 1834; Pub. L. 95–600, title VII, § 701(q)(1)(A), Nov. 6, 1978, 92 Stat. 2909; Pub. L. 99–514, title XVIII, § 1847(b)(16), Oct. 22, 1986, 100 Stat. 2857; Pub. L. 101–508, title XI, § 11802(f)(2), Nov. 5, 1990, 104 Stat. 1388–530; Pub. L. 104–188, title I, § 1904(b)(1), (c)(2), Aug. 20, 1996, 110 Stat. 1912; Pub. L. 105–34, title V, § 507(a), title XVI, § 1604(g)(2), Aug. 5, 1997, 111 Stat. 856, 1099.)
§ 666. Accumulation distribution allocated to preceding years
(a) Amount allocated
(b) Total taxes deemed distributed
(c) Pro rata portion of taxes deemed distributed
(d) Rule when information is not available
(e) Denial of refund to trusts and beneficiaries
(Aug. 16, 1954, ch. 736, 68A Stat. 224; Pub. L. 87–834, § 7(c), Oct. 16, 1962, 76 Stat. 986; Pub. L. 91–172, title III, § 331(a), Dec. 30, 1969, 83 Stat. 593; Pub. L. 94–455, title VII, § 701(a)(2), Oct. 4, 1976, 90 Stat. 1577; Pub. L. 95–600, title IV, § 421(d), Nov. 6, 1978, 92 Stat. 2875; Pub. L. 96–222, title I, § 104(a)(4)(H)(vi), Apr. 1, 1980, 94 Stat. 218.)
§ 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 included in the income of a beneficiary of the trust when paid, credited, or required to be distributed to the extent that such total would have been included in the income of such beneficiary under section 662(a)(2) (and, with respect to any tax-exempt interest to which section 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 such amounts, at the rate and in the manner as if this section had not been enacted,
(2) a partial tax determined as provided in subsection (b) of this section, and
(3) in the case of a foreign trust, the interest 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 preceding 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 immediately preceding the year of the accumulation 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 remaining after the application of subparagraph (B) an amount determined by dividing 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 application of such subparagraph.
The partial tax imposed by subsection (a)(2) shall be the excess (if any) of the average increase in tax determined under subparagraph (D), multiplied by the number of preceding taxable years determined under subparagraph (A), over the amount of taxes (other than the amount of taxes described in section 665(d)(2)) deemed distributed to the beneficiary under sections 666(b) and (c).
(2) Treatment of loss years
(3) Certain preceding taxable years not taken into account
(4) Effect of other accumulation distributions
(5) Multiple distributions in the same taxable year
(6) Adjustment in partial tax for estate and generation-skipping transfer taxes attributable to partial tax
(A) In general
The partial tax shall be reduced by an amount which is equal to the pre-death portion of the partial tax multiplied by a fraction—
(i) the numerator of which is that portion of the tax imposed by chapter 11 or 13, as the case may be, which is attributable (on a proportionate basis) to amounts included in the accumulation distribution, and
(ii) the denominator of which is the amount of the accumulation distribution which is subject to the tax imposed by chapter 11 or 13, as the case may be.
(B) Partial tax determined without regard to this paragraph
(C) Pre-death portion
(c) Special rule for multiple trusts
(1) In general
(2) Accumulation distributions from trust not taken into account unless they equal or exceed $1,000
(d) Special rules for foreign trust
(1) Foreign tax deemed paid by beneficiary
(A) In general
(B) Deduction in lieu of credit
(C) Limitation on credit; retention of character
(i) Limitation on credit
(ii) Retention of character
(D) Computation year
(e) Retention of character of amounts distributed from accumulation trust to nonresident aliens and foreign corporations
(Aug. 16, 1954, ch. 736, 68A Stat. 225; Pub. L. 91–172, title III, § 331(a), Dec. 30, 1969, 83 Stat. 594; Pub. L. 94–455, title VII, § 701(a)(1), title X, § 1014(a), Oct. 4, 1976, 90 Stat. 1575, 1617; Pub. L. 95–30, title I, § 102(b)(8), May 23, 1977, 91 Stat. 138; Pub. L. 95–600, title VII, §§ 701(q)(1)(B), (C), (r)(1), 702(o)(1), Nov. 6, 1978, 92 Stat. 2909, 2910, 2936; Pub. L. 99–514, title I, § 104(b)(10), Oct. 22, 1986, 100 Stat. 2105.)
§ 668. Interest charge on accumulation distributions from foreign trusts
(a) General rule
For purposes of the tax determined under section 667(a)—
(1) Interest determined using underpayment rates
(2) Period
(3) Applicable number of years
For purposes of paragraph (2)—
(A) In general
The applicable number of years with respect to a distribution is the number determined by dividing—
(i) the sum of the products described in subparagraph (B) with respect to each undistributed income year, by
(ii) the aggregate undistributed net income.
The quotient determined under the preceding sentence shall be rounded under procedures prescribed by the Secretary.
(B) Product described
For purposes of subparagraph (A), the product described in this subparagraph with respect to any undistributed income year is the product of—
(i) the undistributed net income for such year, and
(ii) the sum of the number of taxable years between such year and the taxable year of the distribution (counting in each case the undistributed income year but not counting the taxable year of the distribution).
(4) Undistributed income year
(5) Determination of undistributed net income
(6) Periods before 1996
Interest for the portion of the period described in paragraph (2) which occurs before January 1, 1996, shall be determined—
(A) by using an interest rate of 6 percent, and
(B) without compounding until January 1, 1996.
(b) Limitation
(c) Interest charge not deductible
(Added Pub. L. 94–455, title X, § 1014(b), Oct. 4, 1976, 90 Stat. 1617; amended Pub. L. 101–508, title XI, § 11802(f)(3), Nov. 5, 1990, 104 Stat. 1388–530; Pub. L. 104–188, title I, § 1906(a), Aug. 20, 1996, 110 Stat. 1914.)
[§ 669. Repealed. Pub. L. 94–455, title VII, § 701(d)(1), Oct. 4, 1976, 90 Stat. 1578]