[Code of Federal Regulations]
[Title 26, Volume 8]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.642(a)(3)-2]

[Page 19-20]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.642(a)(3)-2  Time of receipt of dividends by beneficiary.

    In general, dividends are deemed received by a beneficiary in the 
taxable year in which they are includible in his gross income under 
section 652 or 662. For example, a simple trust, reporting on the basis 
of a fiscal year ending October 30, receives quarterly dividends on 
November 3, 1954, and February 3, May 3, and August 3, 1955. These 
dividends are all allocable to beneficiary A, reporting on a calendar 
year basis, under section 652 and are deemed received by A in 1955. See 
section 652(c). Accordingly, A may take all these dividends into account 
in determining his credit for dividends received under section 34 and 
his dividends exclusion under section 116. However, solely for purposes 
of determining whether dividends deemed received by individuals from 
trusts or estates qualify under the time limitations of section 34(a) or 
section 116(a), section 642(a)(3) provides that the time of receipt of 
the dividends by the trust or estate is also considered the time of 
receipt by the beneficiary. For example, a simple trust reporting on the 
basis of a fiscal year ending October 30 receives quarterly dividends on 
December 3, 1953, and March 3, June 3, and September 3, 1954. These 
dividends are all allocable to beneficiary A, reporting on the calendar 
year basis, under section 652 and are includible in his income for 1954. 
However, for purposes of section 34(a) or section 116(a), these 
dividends are deemed received by A on the same dates that the trust 
received them. Accordingly, A may take into account in determining the 
credit under section 34 only those dividends received by the trust on 
September 3, 1954, since the dividend received credit is not allowed 
under section 34 for dividends received before August 1, 1954 (or after 
December 31, 1964). Section 642(a)(3) and this section do not apply to 
amounts received by an estate or trust as dividends after December 31, 
1964. However, the rules in this section relating to

[[Page 20]]

time of receipt of dividends by a beneficiary are applicable to 
dividends received by an estate or trust prior to January 1, 1965, and 
accordingly, such dividends are deemed to be received by the beneficiary 
(even though received after December 31, 1964) on the same dates that 
the estate or trust received them for purposes of determining the credit 
under section 34 or the exclusion under section 116.

[T.D. 6777, 29 FR 17808, Dec. 16, 1964]