[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(c)-1]

[Page 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(c)-1  Limitation on deduction.

    An estate or trust is not allowed a deduction under section 661(a) 
for any amount which is treated under section 661(b) as consisting of 
any item of distributable net income which is not included in the gross 
income of the estate or trust. For example, if in 1962, a trust, which 
reports on the calendar year basis, has distributable net income of 
$20,000, which is deemed to consist of $10,000 of dividends and $10,000 
of tax-exempt interest, and distributes $10,000 to beneficiary A, the 
deduction allowable under section 661(a) (computed without regard to 
section 661(c)) would amount to $10,000 consisting of $5,000 of 
dividends and $5,000 of tax-exempt interest. The deduction actually 
allowable under section 661(a) as limited by section 661(c) is $4,975, 
since no deduction is allowable for the $5,000 of tax-exempt interest 
and the $25 deemed distributed out of the $50 of dividends excluded 
under section 116, items of distributable net income which are not 
included in the gross income of the estate or trust.

[T.D. 6777, 29 FR 17809, Dec. 16, 1964]