[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: 26CFR1.645-1]

[Page 88-96]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.645-1  Election by certain revocable trusts to be treated as part 
of estate.

    (a) In general. If an election is filed for a qualified revocable 
trust, as defined in paragraph (b)(1) of this section, in accordance 
with the rules set forth in paragraph (c) of this section, the qualified 
revocable trust is treated and taxed for purposes of subtitle A of the 
Internal Revenue Code as part of its related estate, as defined in 
paragraph (b)(5) of this section (and not as a separate trust) during 
the election period, as defined in paragraph (b)(6) of this section. 
Rules regarding the use of taxpayer identification numbers (TINs) and 
the filing of a Form 1041, ``U.S. Income Tax Return for Estates and 
Trusts,'' for a qualified revocable trust are in paragraph (d) of this 
section. Rules regarding the tax treatment of an electing trust and 
related estate and the general filing requirements for the combined 
entity during the election period are in paragraph (e)(2) of this

[[Page 89]]

section. Rules regarding the tax treatment of an electing trust and its 
filing requirements during the election period if no executor, as 
defined in paragraph (b)(4) of this section, is appointed for a related 
estate are in paragraph (e)(3) of this section. Rules for determining 
the duration of the section 645 election period are in paragraph (f) of 
this section. Rules regarding the tax effects of the termination of the 
election are in paragraph (h) of this section. Rules regarding the tax 
consequences of the appointment of an executor after a trustee has made 
a section 645 election believing that an executor would not be appointed 
for a related estate are in paragraph (g) of this section.
    (b) Definitions. For purposes of this section:
    (1) Qualified revocable trust. A qualified revocable trust (QRT) is 
any trust (or portion thereof) that on the date of death of the decedent 
was treated as owned by the decedent under section 676 by reason of a 
power held by the decedent (determined without regard to section 
672(e)). A trust that was treated as owned by the decedent under section 
676 by reason of a power that was exercisable by the decedent only with 
the approval or consent of a nonadverse party or with the approval or 
consent of the decedent's spouse is a QRT. A trust that was treated as 
owned by the decedent under section 676 solely by reason of a power held 
by a nonadverse party or by reason of a power held by the decedent's 
spouse is not a QRT.
    (2) Electing trust. An electing trust is a QRT for which a valid 
section 645 election has been made. Once a section 645 election has been 
made for the trust, the trust shall be treated as an electing trust 
throughout the entire election period.
    (3) Decedent. The decedent is the individual who was treated as the 
owner of the QRT under section 676 on the date of that individual's 
death.
    (4) Executor. An executor is an executor, personal representative, 
or administrator that has obtained letters of appointment to administer 
the decedent's estate through formal or informal appointment procedures. 
Solely for purposes of this paragraph (b)(4), an executor does not 
include a person that has actual or constructive possession of property 
of the decedent unless that person is also appointed or qualified as an 
executor, administrator, or personal representative of the decedent's 
estate. If more than one jurisdiction has appointed an executor, the 
executor appointed in the domiciliary or primary proceeding is the 
executor of the related estate for purposes of this paragraph (b)(4).
    (5) Related estate. A related estate is the estate of the decedent 
who was treated as the owner of the QRT on the date of the decedent's 
death.
    (6) Election period. The election period is the period of time 
during which an electing trust is treated and taxed as part of its 
related estate. The rules for determining the duration of the election 
period are in paragraph (f) of this section.
    (c) The election--(1) Filing the election if there is an executor--
(i) Time and manner for filing the election. If there is an executor of 
the related estate, the trustees of each QRT joining in the election and 
the executor of the related estate make an election under section 645 
and this section to treat each QRT joining in the election as part of 
the related estate for purposes of subtitle A of the Internal Revenue 
Code by filing a form provided by the IRS for making the election 
(election form) properly completed and signed under penalties of 
perjury, or in any other manner prescribed after December 24, 2002 by 
forms provided by the Internal Revenue Service (IRS), or by other 
published guidance for making the election. For the election to be 
valid, the election form must be filed not later than the time 
prescribed under section 6072 for filing the Form 1041 for the first 
taxable year of the related estate (regardless of whether there is 
sufficient income to require the filing of that return). If an extension 
is granted for the filing of the Form 1041 for the first taxable year of 
the related estate, the election form will be timely filed if it is 
filed by the time prescribed for filing the Form 1041 including the 
extension granted with respect to the Form 1041.
    (ii) Conditions to election. In addition to providing the 
information required by the election form, as a condition to

[[Page 90]]

a valid section 645 election, the trustee of each QRT joining in the 
election and the executor of the related estate agree, by signing the 
election form under penalties of perjury, that:
    (A) With respect to a trustee--
    (1) The trustee agrees to the election;
    (2) The trustee is responsible for timely providing the executor of 
the related estate with all the trust information necessary to permit 
the executor to file a complete, accurate, and timely Form 1041 for the 
combined electing trust(s) and related estate for each taxable year 
during the election period;
    (3) The trustee of each QRT joining the election and the executor of 
the related estate have agreed to allocate the tax burden of the 
combined electing trust(s) and related estate for each taxable year 
during the election period in a manner that reasonably reflects the tax 
obligations of each electing trust and the related estate; and
    (4) The trustee is responsible for insuring that the electing 
trust's share of the tax obligations of the combined electing trust(s) 
and related estate is timely paid to the Secretary.
    (B) With respect to the executor--
    (1) The executor agrees to the election;
    (2) The executor is responsible for filing a complete, accurate, and 
timely Form 1041 for the combined electing trust(s) and related estate 
for each taxable year during the election period;
    (3) The executor and the trustee of each QRT joining in the election 
have agreed to allocate the tax burden of the combined electing trust(s) 
and related estate for each taxable year during the election period in a 
manner that reasonably reflects the tax obligations of each electing 
trust and the related estate;
    (4) The executor is responsible for insuring that the related 
estate's share of the tax obligations of the combined electing trust(s) 
and related estate is timely paid to the Secretary.
    (2) Filing the election if there is no executor--(i) Time and manner 
for filing the election. If there is no executor for a related estate, 
an election to treat one or more QRTs of the decedent as an estate for 
purposes of subtitle A of the Internal Revenue Code is made by the 
trustees of each QRT joining in the election, by filing a properly 
completed election form, or in any other manner prescribed after 
December 24, 2002 by forms provided by the IRS, or by other published 
guidance for making the election. For the election to be valid, the 
election form must be filed not later than the time prescribed under 
section 6072 for filing the Form 1041 for the first taxable year of the 
trust, taking into account the trustee's election to treat the trust as 
an estate under section 645 (regardless of whether there is sufficient 
income to require the filing of that return). If an extension is granted 
for the filing of the Form 1041 for the first taxable year of the 
electing trust, the election form will be timely filed if it is filed by 
the time prescribed for filing the Form 1041 including the extension 
granted with respect to the filing of the Form 1041.
    (ii) Conditions to election. In addition to providing the 
information required by the election form, as a condition to a valid 
section 645 election, the trustee of each QRT joining in the election 
agrees, by signing the election form under penalties of perjury, that--
    (A) The trustee agrees to the election;
    (B) If there is more than one QRT joining in the election, the 
trustees of each QRT joining in the election have appointed one trustee 
to be responsible for filing the Form 1041 for the combined electing 
trusts for each taxable year during the election period (filing trustee) 
and the filing trustee has agreed to accept that responsibility;
    (C) If there is more than one QRT, the trustees of each QRT joining 
in the election have agreed to allocate the tax liability of the 
combined electing trusts for each taxable year during the election 
period in a manner that reasonably reflects the tax obligations of each 
electing trust;
    (D) The trustee agrees to:
    (1) Timely file a Form 1041 for the electing trust(s) for each 
taxable year during the election period; or
    (2) If there is more than one QRT and the trustee is not the filing 
trustee, timely provide the filing trustee with all of the electing 
trust's information necessary to permit the filing trustee to file a 
complete, accurate, and timely

[[Page 91]]

Form 1041 for the combined electing trusts for each taxable year during 
the election period;
    (3) Insure that the electing trust's share of the tax burden is 
timely paid to the Secretary;
    (E) There is no executor and, to the knowledge and belief of the 
trustee, one will not be appointed; and
    (F) If an executor is appointed after the filing of the election 
form and the executor agrees to the section 645 election, the trustee 
will complete and file a revised election form with the executor.
    (3) Election for more than one QRT. If there is more than one QRT, 
the election may be made for some or all of the QRTs. If there is no 
executor, one trustee must be appointed by the trustees of the electing 
trusts to file Forms 1041 for the combined electing trusts filing as an 
estate during the election period.
    (d) TIN and filing requirements for a QRT--(1) Obtaining a TIN. 
Regardless of whether there is an executor for a related estate and 
regardless of whether a section 645 election will be made for the QRT, a 
TIN must be obtained for the QRT following the death of the decedent. 
See Sec. 301.6109-1(a)(3) of this chapter. The trustee must furnish 
this TIN to the payors of the QRT. See Sec. 301.6109-1(a)(5) of this 
chapter for the definition of payor.
    (2) Filing a Form 1041 for a QRT--(i) Option not to file a Form 1041 
for a QRT for which a section 645 election will be made. If a section 
645 election will be made for a QRT, the executor of the related estate, 
if any, and the trustee of the QRT may treat the QRT as an electing 
trust from the decedent's date of death until the due date for the 
section 645 election. Accordingly, the trustee of the QRT is not 
required to file a Form 1041 for the QRT for the short taxable year 
beginning with the decedent's date of death and ending December 31 of 
that year. However, if a QRT is treated as an electing trust under this 
paragraph from the decedent's date of death until the due date for the 
section 645 election but a valid section 645 election is not made for 
the QRT, the QRT will be subject to penalties and interest for failing 
to timely file a Form 1041 and pay the tax due thereon.
    (ii) Requirement to file a Form 1041 for a QRT if paragraph 
(d)(2)(i) of this section does not apply--(A) Requirement to file Form 
1041. If the trustee of the QRT and the executor of the related estate, 
if any, do not treat the QRT as an electing trust as provided under 
paragraph (d)(2)(i) of this section, or if the trustee of the electing 
trust and the executor, if any, are uncertain whether a section 645 
election will be made for a QRT, the trustee of the QRT must file a Form 
1041 for the short taxable year beginning with the decedent's death and 
ending December 31 of that year (unless the QRT is not required to file 
a Form 1041 under section 6012 for this period).
    (B) Requirement to amend Form 1041 if a section 645 election is 
made--(1) If there is an executor. If there is an executor and a valid 
section 645 election is made for a QRT after a Form 1041 has been filed 
for the QRT as a trust (see paragraph (d)(2)(ii)(A) of this section), 
the trustee must amend the Form 1041. The QRT's items of income, 
deduction, and credit must be excluded from the amended Form 1041 filed 
under this paragraph and must be included on the Form 1041 filed for the 
first taxable year of the combined electing trust and related estate 
under paragraph (e)(2)(ii)(A) of this section.
    (2) If there is no executor. If there is no executor and a valid 
section 645 election is made for a QRT after a Form 1041 has been filed 
for the QRT as a trust (see paragraph (d)(2)(ii)(A) of this section) for 
the short taxable year beginning with the decedent's death and ending 
December 31 of that year, the trustee must file an amended return for 
the QRT. The amended return must be filed consistent with paragraph 
(e)(3) of this section and must be filed by the due date of the Form 
1041 for the QRT, taking into account the trustee's election under 
section 645.
    (e) Tax treatment and general filing requirements of electing trust 
and related estate during the election period--(1) Effect of election. 
The section 645 election once made is irrevocable.
    (2) If there is an executor--(i) Tax treatment of the combined 
electing trust and related estate. If there is an executor,

[[Page 92]]

the electing trust is treated, during the election period, as part of 
the related estate for all purposes of subtitle A of the Internal 
Revenue Code. Thus, for example, the electing trust is treated as part 
of the related estate for purposes of the set-aside deduction under 
section 642(c)(2), the subchapter S shareholder requirements of section 
1361(b)(1), and the special offset for rental real estate activities in 
section 469(i)(4).
    (ii) Filing requirements--(A) Filing the Form 1041 for the combined 
electing trust and related estate during the election period. If there 
is an executor, the executor files a single income tax return annually 
(assuming a return is required under section 6012) under the name and 
TIN of the related estate for the combined electing trust and the 
related estate. Information regarding the name and TIN of each electing 
trust must be provided on the Form 1041 as required by the instructions 
to that form. The period of limitations provided in section 6501 for 
assessments with respect to an electing trust and the related estate 
starts with the filing of the return required under this paragraph. 
Except as required under the separate share rules of section 663(c), for 
purposes of filing the Form 1041 under this paragraph and computing the 
tax, the items of income, deduction, and credit of the electing trust 
and related estate are combined. One personal exemption in the amount of 
$600 is permitted under section 642(b), and the tax is computed under 
section 1(e), taking into account section 1(h), for the combined taxable 
income.
    (B) Filing a Form 1041 for the electing trust is not required. 
Except for any final Form 1041 required to be filed under paragraph 
(h)(2)(i)(B) of this section, if there is an executor, the trustee of 
the electing trust does not file a Form 1041 for the electing trust 
during the election period. Although the trustee is not required to file 
a Form 1041 for the electing trust, the trustee of the electing trust 
must timely provide the executor of the related estate with all the 
trust information necessary to permit the executor to file a complete, 
accurate and timely Form 1041 for the combined electing trust and 
related estate. The trustee must also insure that the electing trust's 
share of the tax obligations of the combined electing trust and related 
estate is timely paid to the Secretary. In certain situations, the 
trustee of a QRT may be required to file a Form 1041 for the QRT's short 
taxable year beginning with the date of the decedent's death and ending 
December 31 of that year. See paragraph (d)(2) of this section.
    (iii) Application of the separate share rules--(A) Distributions to 
beneficiaries (other than to a share (or shares) of the combined 
electing trust and related estate). Under the separate share rules of 
section 663(c), the electing trust and related estate are treated as 
separate shares for purposes of computing distributable net income (DNI) 
and applying the distribution provisions of sections 661 and 662. 
Further, the electing trust share or the related estate share may each 
contain two or more shares. Thus, if during the taxable year, a 
distribution is made by the electing trust or the related estate, the 
DNI of the share making the distribution must be determined and the 
distribution provisions of sections 661 and 662 must be applied using 
the separately determined DNI applicable to the distributing share.
    (B) Adjustments to the DNI of the separate shares for distributions 
between shares to which sections 661 and 662 would apply. A distribution 
from one share to another share to which sections 661 and 662 would 
apply if made to a beneficiary other than another share of the combined 
electing trust and related estate affects the computation of the DNI of 
the share making the distribution and the share receiving the 
distribution. The share making the distribution reduces its DNI by the 
amount of the distribution deduction that it would be entitled to under 
section 661 (determined without regard to section 661(c)), had the 
distribution been made to another beneficiary, and, solely for purposes 
of calculating DNI, the share receiving the distribution increases its 
gross income by the same amount. The distribution has the same character 
in the hands of the recipient share as in the hands of the distributing 
share. The following example illustrates the provisions of this 
paragraph (e)(2)(iii)(B):


[[Page 93]]


    Example. (i) A's will provides that, after the payment of debts, 
expenses, and taxes, the residue of A's estate is to be distributed to 
Trust, an electing trust. The sole beneficiary of Trust is C. The estate 
share has $15,000 of gross income, $5,000 of deductions, and $10,000 of 
taxable income and DNI for the taxable year based on the assets held in 
A's estate. During the taxable year, A's estate distributes $15,000 to 
Trust. The distribution reduces the DNI of the estate share by $10,000.
    (ii) For the same taxable year, the trust share has $25,000 of gross 
income and $5,000 of deductions. None of the modifications provided for 
under section 643(a) apply. In calculating the DNI for the trust share, 
the gross income of the trust share is increased by $10,000, the amount 
of the reduction in the DNI of the estate share as a result of the 
distribution to Trust. Thus, solely for purposes of calculating DNI, the 
trust share has gross income of $35,000, and taxable income of $30,000. 
Therefore, the trust share has $30,000 of DNI for the taxable year.
    (iii) During the same taxable year, Trust distributes $35,000 to C. 
The distribution deduction reported on the Form 1041 filed for A's 
estate and Trust is $30,000. As a result of the distribution by Trust to 
C, C must include $30,000 in gross income for the taxable year. The 
gross income reported on the Form 1041 filed for A's estate and Trust is 
$40,000.

    (iv) Application of the governing instrument requirement of section 
642(c). A deduction is allowed in computing the taxable income of the 
combined electing trust and related estate to the extent permitted under 
section 642(c) for--
    (A) Any amount of the gross income of the related estate that is 
paid or set aside during the taxable year pursuant to the terms of the 
governing instrument of the related estate for a purpose specified in 
section 170(c); and
    (B) Any amount of gross income of the electing trust that is paid or 
set aside during the taxable year pursuant to the terms of the governing 
instrument of the electing trust for a purpose specified in section 
170(c).
    (3) If there is no executor--(i) Tax treatment of the electing 
trust. If there is no executor, the trustee treats the electing trust, 
during the election period, as an estate for all purposes of subtitle A 
of the Internal Revenue Code. Thus, for example, an electing trust is 
treated as an estate for purposes of the set-aside deduction under 
section 642(c)(2), the subchapter S shareholder requirements of section 
1361(b)(1), and the special offset for rental real estate activities 
under section 469(i)(4). The trustee may also adopt a taxable year other 
than a calendar year.
    (ii) Filing the Form 1041 for the electing trust. If there is no 
executor, the trustee of the electing trust must, during the election 
period, file a Form 1041, under the TIN obtained by the trustee under 
Sec. 301.6109-1(a)(3) of this chapter upon the death of the decedent, 
treating the trust as an estate. If there is more than one electing 
trust, the Form 1041 must be filed by the filing trustee (see paragraph 
(c)(2)(ii)(B) of this section) under the name and TIN of the electing 
trust of the filing trustee. Information regarding the names and TINs of 
the other electing trusts must be provided on the Form 1041 as required 
by the instructions to that form. Any return filed in accordance with 
this paragraph shall be treated as a return filed for the electing trust 
(or trusts, if there is more than one electing trust) and not as a 
return filed for any subsequently discovered related estate. 
Accordingly, the period of limitations provided in section 6501 for 
assessments with respect to a subsequently discovered related estate 
does not start until a return is filed with respect to the related 
estate. See paragraph (g) of this section.
    (4) Application of the section 6654(l)(2) to the electing trust. 
Each electing trust and related estate (if any) is treated as a separate 
taxpayer for all purposes of subtitle F of the Internal Revenue Code, 
including, without limitation, the application of section 6654. The 
provisions of section 6654(l)(2)(A) relating to the two year exception 
to an estate's obligation to make estimated tax payments, however, will 
apply to each electing trust for which a section 645 election has been 
made.
    (f) Duration of election period--(1) In general. The election period 
begins on the date of the decedent's death and terminates on the earlier 
of the day on which both the electing trust and related estate, if any, 
have distributed all of their assets, or the day before the applicable 
date. The election does not apply to successor trusts (trusts that are 
distributees under the trust instrument).

[[Page 94]]

    (2) Definition of applicable date--(i) Applicable date if no Form 
706 ``United States Estate (and Generation Skipping Transfer) Tax 
Return'' is required to be filed. If a Form 706 is not required to be 
filed as a result of the decedent's death, the applicable date is the 
day which is 2 years after the date of the decedent's death.
    (ii) Applicable date if a Form 706 is required to be filed. If a 
Form 706 is required to be filed as a result of the decedent's death, 
the applicable date is the later of the day that is 2 years after the 
date of the decedent's death, or the day that is 6 months after the date 
of final determination of liability for estate tax. Solely for purposes 
of determining the applicable date under section 645, the date of final 
determination of liability is the earliest of the following--
    (A) The date that is six months after the issuance by the Internal 
Revenue Service of an estate tax closing letter, unless a claim for 
refund with respect to the estate tax is filed within twelve months 
after the issuance of the letter;
    (B) The date of a final disposition of a claim for refund, as 
defined in paragraph (f)(2)(iii) of this section, that resolves the 
liability for the estate tax, unless suit is instituted within six 
months after a final disposition of the claim;
    (C) The date of execution of a settlement agreement with the 
Internal Revenue Service that determines the liability for the estate 
tax;
    (D) The date of issuance of a decision, judgment, decree, or other 
order by a court of competent jurisdiction resolving the liability for 
the estate tax unless a notice of appeal or a petition for certiorari is 
filed within 90 days after the issuance of a decision, judgment, decree, 
or other order of a court; or
    (E) The date of expiration of the period of limitations for 
assessment of the estate tax provided in section 6501.
    (iii) Definition of final disposition of claim for refund. For 
purposes of paragraph (f)(2)(ii)(B) of this section, a claim for refund 
shall be deemed finally disposed of by the Secretary when all items have 
been either allowed or disallowed. If a waiver of notification with 
respect to disallowance is filed with respect to a claim for refund 
prior to disallowance of the claim, the claim for refund will be treated 
as disallowed on the date the waiver is filed.
    (iv) Examples. The application of this paragraph (f)(2) is 
illustrated by the following examples:

    Example 1. A died on October 20, 2002. The executor of A's estate 
and the trustee of Trust, an electing trust, made a section 645 
election. A Form 706 is not required to be filed as a result of A's 
death. The applicable date is October 20, 2004, the day that is two 
years after A's date of death. The last day of the election period is 
October 19, 2004. Beginning October 20, 2004, Trust will no longer be 
treated and taxed as part of A's estate.
    Example 2. Assume the same facts as Example 1, except that a Form 
706 is required to be filed as the result of A's death. The Internal 
Revenue Service issues an estate tax closing letter accepting the Form 
706 as filed on March 15, 2005. The estate does not file a claim for 
refund by March 15, 2006, the day that is twelve months after the date 
of issuance of the estate tax closing letter. The date of final 
determination of liability is September 15, 2005, and the applicable 
date is March 15, 2006. The last day of the election period is March 14, 
2006. Beginning March 15, 2006, Trust will no longer be treated and 
taxed as part of A's estate.
    Example 3. Assume the same facts as Example 1, except that a Form 
706 is required to be filed as the result of A's death. The Form 706 is 
audited, and a notice of deficiency authorized under section 6212 is 
mailed to the executor of A's estate as a result of the audit. The 
executor files a petition in Tax Court. The Tax Court issues a decision 
resolving the liability for estate tax on December 14, 2005, and neither 
party appeals within 90 days after the issuance of the decision. The 
date of final determination of liability is December 14, 2005. The 
applicable date is June 14, 2006, the day that is six months after the 
date of final determination of liability. The last day of the election 
period is June 13, 2006. Beginning June 14, 2006, Trust will no longer 
be treated and taxed as part of A's estate.

    (g) Executor appointed after the section 645 election is made--(1) 
Effect on the election. If an executor for the related estate is not 
appointed until after the trustee has made a valid section 645 election, 
the executor must agree to the trustee's election, and the IRS must be 
notified of that agreement by the filing of a revised election form 
(completed as required by the instructions to that form) within 90 days 
of the appointment of the executor, for the election period to continue 
past the

[[Page 95]]

date of appointment of the executor. If the executor does not agree to 
the election or a revised election form is not timely filed as required 
by this paragraph, the election period terminates the day before the 
appointment of the executor. If the IRS issues other guidance after 
December 24, 2002 for notifying the IRS of the executor's agreement to 
the election, the IRS must be notified in the manner provided in that 
guidance for the election period to continue.
    (2) Continuation of election period--(i) Correction of returns filed 
before executor appointed. If the election period continues under 
paragraph (g)(1) of this section, the executor of the related estate and 
the trustee of each electing trust must file amended Forms 1041 to 
correct the Forms 1041 filed by the trustee before the executor was 
appointed. The amended Forms 1041 must be filed under the name and TIN 
of the electing trust and must reflect the items of income, deduction, 
and credit of the related estate and the electing trust. The name and 
TIN of the related estate must be provided on the amended Forms 1041 as 
required in the instructions to that Form. The amended return for the 
taxable year ending immediately before the executor was appointed must 
indicate that this Form 1041 is a final return. If the period of 
limitations for making assessments has expired with respect to the 
electing trust for any of the Forms 1041 filed by the trustee, the 
executor must file Forms 1041 for any items of income, deduction, and 
credit of the related estate that cannot be properly included on amended 
forms for the electing trust. The personal exemption under section 
642(b) is not permitted to be taken on these Forms 1041 filed by the 
executor.
    (ii) Returns filed after the appointment of the executor. All 
returns filed by the combined electing trust and related estate after 
the appointment of the executor are to be filed under the name and TIN 
of the related estate in accordance with paragraph (e)(2) of this 
section. Regardless of the change in the name and TIN under which the 
Forms 1041 for the combined electing trust and related estate are filed, 
the combined electing trust and related estate will be treated as the 
same entity before and after the executor is appointed.
    (3) Termination of the election period. If the election period 
terminates under paragraph (g)(1) of this section, the executor must 
file Forms 1041 under the name and TIN of the estate for all taxable 
years of the related estate ending after the death of the decedent. The 
trustee of the electing trust is not required to amend any returns filed 
for the electing trust during the election period. Following termination 
of the election period, the trustee of the electing trust must obtain a 
new TIN. See Sec. 301.6109-1(a)(4) of this chapter.
    (h) Treatment of an electing trust and related estate following 
termination of the election--(1) The share (or shares) comprising the 
electing trust is deemed to be distributed upon termination of the 
election period. On the close of the last day of the election period, 
the combined electing trust and related estate, if there is an executor, 
or the electing trust, if there is no executor, is deemed to distribute 
the share (or shares, as determined under section 663(c)) comprising the 
electing trust to a new trust in a distribution to which sections 661 
and 662 apply. All items of income, including net capital gains, that 
are attributable to the share (or shares) comprising the electing trust 
are included in the calculation of the distributable net income of the 
electing trust and treated as distributed by the combined electing trust 
and related estate, if there is an executor, or by the electing trust, 
if there is no executor, to the new trust. The combined electing trust 
and related estate, if there is an executor, or the electing trust, if 
there is no executor, is entitled to a distribution deduction to the 
extent permitted under section 661 in the taxable year in which the 
election period terminates as a result of the deemed distribution. The 
new trust shall include the amount of the deemed distribution in gross 
income to the extent required under section 662.
    (2) Filing of the Form 1041 upon the termination of the section 645 
election--(i) If there is an executor--(A) Filing the Form 1041 for the 
year of termination. If there is an executor, the Form 1041 filed under 
the name and TIN of the related

[[Page 96]]

estate for the taxable year in which the election terminates includes--
    (1) The items of income, deduction, and credit of the electing trust 
attributable to the period beginning with the first day of the taxable 
year of the combined electing trust and related estate and ending with 
the last day of the election period;
    (2) The items of income, deduction, and credit, if any, of the 
related estate for the entire taxable year; and
    (3) A deduction for the deemed distribution of the share (or shares) 
comprising the electing trust to the new trust as provided for under 
paragraph (h)(1) of this section.
    (B) Requirement to file a final Form 1041 under the name and TIN of 
the electing trust. If the electing trust terminates during the election 
period, the trustee of the electing trust must file a Form 1041 under 
the name and TIN of the electing trust and indicate that the return is a 
final return to notify the IRS that the electing trust is no longer in 
existence. The items of income, deduction, and credit of the trust are 
not reported on this final Form 1041 but on the appropriate Form 1041 
filed for the combined electing trust and related estate.
    (ii) If there is no executor. If there is no executor, the taxable 
year of the electing trust closes on the last day of the election 
period. A Form 1041 is filed in the manner prescribed under paragraph 
(e)(3)(ii) of this section reporting the items of income, deduction, and 
credit of the electing trust for the short period ending with the last 
day of the election period. The Form 1041 filed under this paragraph 
includes a distribution deduction for the deemed distribution provided 
for under paragraph (h)(1) of this section. The Form 1041 must indicate 
that it is a final return.
    (3) Use of TINs following termination of the election--(i) If there 
is an executor. Upon termination of the section 645 election, a former 
electing trust may need to obtain a new TIN. See Sec. 301.6109-1(a)(4) 
of this chapter. If the related estate continues after the termination 
of the election period, the related estate must continue to use the TIN 
assigned to the estate during the election period.
    (ii) If there is no executor. If there is no executor, the former 
electing trust must obtain a new TIN if the trust will continue after 
the termination of the election period. See Sec. 301.6109-1(a)(4) of 
this chapter.
    (4) Taxable year of estate and trust upon termination of the 
election--(i) Estate--Upon termination of the section 645 election 
period, the taxable year of the estate is the same taxable year used 
during the election period.
    (ii) Trust. Upon termination of the section 645 election, the 
taxable year of the new trust is the calendar year. See section 644.
    (i) Reserved.
    (j) Effective date. Paragraphs (a), (b), (c), (d), (f), and (g) of 
this section apply to trusts and estates of decedents dying on or after 
December 24, 2002. Paragraphs (e) and (h) of this section apply to 
taxable years ending on or after December 24, 2002.

[T.D. 9032, 67 FR 78377, Dec. 24, 2002]

               trusts which distribute current income only