[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(c)-4]

[Page 119]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.663(c)-4  Applicability of separate share rule to estates and 
qualified revocable trusts.

    (a) General rule. The applicability of the separate share rule 
provided by section 663(c) to estates and qualified revocable trusts 
within the meaning of section 645(b)(1) will generally depend upon 
whether the governing instrument and applicable local law create 
separate economic interests in one beneficiary or class of beneficiaries 
of such estate or trust. Ordinarily, a separate share exists if the 
economic interests of the beneficiary or class of beneficiaries neither 
affect nor are affected by the economic interests accruing to another 
beneficiary or class of beneficiaries. Separate shares include, for 
example, the income on bequeathed property if the recipient of the 
specific bequest is entitled to such income and a surviving spouse's 
elective share that under local law is entitled to income and 
appreciation or depreciation. Furthermore, a qualified revocable trust 
for which an election is made under section 645 is always a separate 
share of the estate and may itself contain two or more separate shares. 
Conversely, a gift or bequest of a specific sum of money or of property 
as defined in section 663(a)(1) is not a separate share.
    (b) Special rule for certain types of beneficial interests. 
Notwithstanding the provisions of paragraph (a) of this section, a 
surviving spouse's elective share that under local law is determined as 
of the date of the decedent's death and is not entitled to income or any 
appreciation or depreciation is a separate share. Similarly, 
notwithstanding the provisions of paragraph (a) of this section, a 
pecuniary formula bequest that, under the terms of the governing 
instrument or applicable local law, is not entitled to income or to 
share in appreciation or depreciation constitutes a separate share if 
the governing instrument does not provide that it is to be paid or 
credited in more than three installments.
    (c) Shares with multiple beneficiaries and beneficiaries of multiple 
shares. A share may be considered as separate even though more than one 
beneficiary has an interest in it. For example, two beneficiaries may 
have equal, disproportionate, or indeterminate interests in one share 
which is economically separate and independent from another share in 
which one or more beneficiaries have an interest. Moreover, the same 
person may be a beneficiary of more than one separate share.

[T.D. 8849, 64 FR 72544, Dec. 28, 1999]