[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: 26CFR1.652(b)-1]

[Page 99]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.652(b)-1  Character of amounts.

    In determining the gross income of a beneficiary, the amounts 
includible under Sec. 1.652(a)-1 have the same character in the hands 
of the beneficiary as in the hands of the trust. For example, to the 
extent that the amounts specified in Sec. 1.652(a)-1 consist of income 
exempt from tax under section 103, such amounts are not included in the 
beneficiary's gross income. Similarly, dividends distributed to a 
beneficiary retain their original character in the beneficiary's hands 
for purposes of determining the availability to the beneficiary of the 
dividends received credit under section 34 (for dividends received on or 
before December 31, 1964) and the dividend exclusion under section 116. 
Also, to the extent that the amounts specified in Sec. 1.652(a)-1 
consist of ``earned income'' in the hands of the trust under the 
provisions of section 1348 such amount shall be treated under section 
1348 as ``earned income'' in the hands of the beneficiary. Similarly, to 
the extent such amounts consist of an amount received as a part of a 
lump sum distribution from a qualified plan and to which the provisions 
of section 72(n) would apply in the hands of the trust, such amount 
shall be treated as subject to such section in the hands of the 
beneficiary except where such amount is deemed under section 666(a) to 
have been distributed in a preceding taxable year of the trust and the 
partial tax described in section 668(a)(2) is determined under section 
668(b)(1)(B). The tax treatment of amounts determined under Sec. 
1.652(a)-1 depends upon the beneficiary's status with respect to them 
not upon the status of the trust. Thus, if a beneficiary is deemed to 
have received foreign income of a foreign trust, the includibility of 
such income in his gross income depends upon his taxable status with 
respect to that income.

[T.D. 7204, 37 FR 17134, Aug. 25, 1972]