[Code of Federal Regulations]
[Title 26, Volume 2]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.167(h)-1]

[Page 1014]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.167(h)-1  Life tenants and beneficiaries of trusts and estates.

    (a) Life tenants. In the case of property held by one person for 
life with remainder to another person, the deduction for depreciation 
shall be computed as if the life tenant were the absolute owner of the 
property so that he will be entitled to the deduction during his life, 
and thereafter the deduction, if any, shall be allowed to the 
remainderman.
    (b) Trusts. If property is held in trust, the allowable deduction is 
to be apportioned between the income beneficiaries and the trustee on 
the basis of the trust income allocable to each, unless the governing 
instrument (or local law) requires or permits the trustee to maintain a 
reserve for depreciation in any amount. In the latter case, the 
deduction is first allocated to the trustee to the extent that income is 
set aside for a depreciation reserve, and any part of the deduction in 
excess of the income set aside for the reserve shall be apportioned 
between the income beneficiaries and the trustee on the basis of the 
trust income (in excess of the income set aside for the reserve) 
allocable to each. For example:
    (1) If under the trust instrument or local law the income of a trust 
computed without regard to depreciation is to be distributed to a named 
beneficiary, the beneficiary is entitled to the deduction to the 
exclusion of the trustee.
    (2) If under the trust instrument or local law the income of a trust 
is to be distributed to a named beneficiary, but the trustee is directed 
to maintain a reserve for depreciation in any amount, the deduction is 
allowed to the trustee (except to the extent that income set aside for 
the reserve is less than the allowable deduction). The same result would 
follow if the trustee sets aside income for a depreciation reserve 
pursuant to discretionary authority to do so in the governing 
instrument.

No effect shall be given to any allocation of the depreciation deduction 
which gives any beneficiary or the trustee a share of such deduction 
greater than his pro rata share of the trust income, irrespective of any 
provisions in the trust instrument except as otherwise provided in this 
paragraph when the trust instrument or local law requires or permits the 
trustee to maintain a reserve for depreciation.
    (c) Estates. In the case of an estate the allowable deduction shall 
be apportioned between the estate and the heirs legatees, and devisees 
on the basis of income of the estate which is allocable to each.

[T.D. 6500, 25 FR 11402, Nov. 26, 1960. Redesignated, T.D. 6712, 29 FR 
3653, Mar. 24, 1964]

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