[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: 26CFR1.661(a)-2]

[Page 103-104]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.661(a)-2  Deduction for distributions to beneficiaries.

    (a) In computing the taxable income of an estate or trust there is 
allowed under section 661(a) as a deduction for distributions to 
beneficiaries the sum of:
    (1) The amount of income for the taxable year which is required to 
be distributed currently, and
    (2) Any other amounts properly paid or credited or required to be 
distributed for such taxable year.

However, the total amount deductible under section 661(a) cannot exceed 
the distributable net income as computed under section 643(a) and as 
modified by section 661(c). See Sec. 1.661(c)-1.
    (b) The term income required to be distributed currently includes 
any amount required to be distributed which may be paid out of income or 
corpus (such as an annuity), to the extent it is paid out of income for 
the taxable year. See Sec. 1.651(a)-2 which sets forth additional rules 
which are applicable in determining whether income of an estate or trust 
is required to be distributed currently.
    (c) The term any other amounts properly paid, credited, or required 
to be distributed includes all amounts properly paid, credited, or 
required to be distributed by an estate or trust during the taxable year 
other than income required to be distributed currently. Thus, the term 
includes the payment of an annuity to the extent it is not paid out of 
income for the taxable year, and a distribution of property in kind (see 
paragraph (f) of this section). However, see section 663(a) and 
regulations thereunder for distributions which are not included. Where 
the income of an estate or trust may be accumulated or distributed in 
the discretion of the fiduciary, or where the fiduciary has a power to 
distribute corpus to a beneficiary, any such discretionary distribution 
would qualify under section 661(a)(2). The term also includes an amount 
applied or distributed for the support of a dependent of a grantor or of 
a trustee or cotrustee under the circumstances described in section 
677(b) or section 678(c) out of corpus or out of other than income for 
the taxable year.
    (d) The terms income required to be distributed currently and any 
other amounts properly paid or credited or required to be distributed 
also include any amount used to discharge or satisfy any person's legal 
obligation as that term is used in Sec. 1.662(a)-4.
    (e) The terms income required to be distributed currently and any 
other amounts properly paid or credited or required to be distributed 
include amounts paid, or required to be paid, during the taxable year 
pursuant to a court order or decree or under local law, by a decedent's 
estate as an allowance or award for the support of the decedent's widow 
or other dependent for a limited period during the administration of the 
estate. The term any other amounts properly paid or credited or required 
to be distributed does not include the value of any interest in real 
estate owned by a decedent, title to which under local law

[[Page 104]]

passes directly from the decedent to his heirs or devisees.
    (f) Gain or loss is realized by the trust or estate (or the other 
beneficiaries) by reason of a distribution of property in kind if the 
distribution is in satisfaction of a right to receive a distribution of 
a specific dollar amount, of specific property other than that 
distributed, or of income as defined under section 643(b) and the 
applicable regulations, if income is required to be distributed 
currently. In addition, gain or loss is realized if the trustee or 
executor makes the election to recognize gain or loss under section 
643(e). This paragraph applies for taxable years of trusts and estates 
ending after January 2, 2004.

[T.D. 6500, 25 FR 11814, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, as 
amended by T.D. 7287, 38 FR 26912, Sept. 27, 1973; T.D. 9102, 69 FR 20, 
Jan. 2, 2004]