[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: 26CFR1.663(b)-1]

[Page 115-116]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.663(b)-1  Distributions in first 65 days of taxable year; scope.

    (a) Taxable years beginning after December 31, 1968--(1) General 
rule. With respect to taxable years beginning after December 31, 1968, 
the fiduciary of a trust may elect under section (b) to 663 treat any 
amount or portion thereof that is properly paid or credited to a 
beneficiary within the first 65 days following the close of the taxable 
year as an amount that was properly paid or credited on the last day of 
such taxable year.
    (2) Effect of election. (i) An election is effective only with 
respect to the taxable year for which the election is made. In the case 
of distributions made after May 8, 1972, the amount to which the 
election applies shall not exceed:
    (a) The amount of income of the trust (as defined in Sec. 1.643(b)-
1) for the taxable year for which the election is made, or
    (b) The amount of distributable net income of the trust (as defined 
in Sec. Sec. 1.643(a)-1 through 1.643(a)-7) for such taxable year, if 
greater,

reduced by any amounts paid, credited, or required to be distributed in 
such taxable year other than those amounts considered paid or credited 
in a preceding taxable year by reason of section 663(b) and this 
section. An election shall be made for each taxable year for

[[Page 116]]

which the treatment is desired. The application of this paragraph may be 
illustrated by the following example:

    Example. X Trust, a calendar year trust, has $1,000 of income (as 
defined in Sec. 1.643(b)-1) and $800 of distributable net income (as 
defined in Sec. Sec. 1.643(a)-1 through 1.643(a)-7) in 1972. The trust 
properly pays $550 to A, a beneficiary, on January 15, 1972, which the 
trustee elects to treat under section 663(b) as paid on December 31, 
1971. The trust also properly pays to A $600 on July 19, 1972, and $450 
on January 17, 1973. For 1972, the maximum amount that may be elected 
under this subdivision to be treated as properly paid or credited on the 
last day of 1972 is $400 ($1,000-$600). The $550 paid on January 15, 
1972, does not reduce the maximum amount to which the election may 
apply, because that amount is treated as properly paid on December 31, 
1971.

    (ii) If an election is made with respect to a taxable year of a 
trust, this section shall apply only to those amounts which are properly 
paid or credited within the first 65 days following such year and which 
are so designated by the fiduciary in his election. Any amount 
considered under section 663(b) as having been distributed in the 
preceding taxable year shall be so treated for all purposes. For 
example, in determining the beneficiary's tax liability, such amount 
shall be considered as having been received by the beneficiary in his 
taxable year in which or with which the last day of the preceding 
taxable year of the trust ends.
    (b) Taxable years beginning before January 1, 1969. With respect to 
taxable years of a trust beginning before January 1, 1969, the fiduciary 
of the trust may elect under section 663(b) to treat distributions 
within the first 65 days following such taxable year as amounts which 
were paid or credited on the last day of such taxable year, if:
    (1) The trust was in existence prior to January 1, 1954;
    (2) An amount in excess of the income of the immediately preceding 
taxable year may not (under the terms of the governing instrument) be 
distributed in any taxable year; and
    (3) The fiduciary elects (as provided in Sec. 1.663(b)-2) to have 
section 663(b) apply.

[T.D. 7204, 37 FR 17135, Aug. 25, 1972]