[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: 26CFR1.665(a)-0A]

[Page 258-259]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.665(a)-0A  Excess distributions by trusts; scope of subpart D.

    (a) In general. (1) Subpart D (section 665 and following), part I, 
subchapter J, chapter 1 of the Code as amended by the Tax Reform Act of 
1969, is designed to tax the beneficiary of a trust that accumulates, 
rather than distributes, all or part of its income currently (i.e., an 
accumulation trust), in most cases, as if the income had been currently 
distributed to the beneficiary instead of accumulated by the trusts. 
Accordingly, subpart D provides special rules for the treatment of 
amounts paid, credited, or required to be distributed by a complex trust 
(one that is subject to subpart C (section 661 and following) of such 
part I) in any year in excess of ``distributable net income'' (as 
defined in section 643 (a)) for that year. Such an excess distribution 
is an ``accumulation distribution'' (as defined in section 665(b)). The 
special rules of subpart D are generally inapplicable to amounts paid, 
credited, or required to be distributed by a trust in a taxable year in 
which it qualifies as a simple trust (one that is subject to subpart B 
(section 651 and following) of such part I). However, see Sec. 
1.665(e)-1A(b) for rules

[[Page 259]]

relating to the treatment of a simple trust as a complex trust.
    (2) An accumulation distribution is deemed to consist of, first, 
``undistributed net income'' (as defined in section 665(a)) of the trust 
from preceding taxable years, and, after all the undistributed net 
income for all preceding taxable years has been deemed distributed, 
``undistributed capital gain'' (as defined in section 665(f)) of the 
trust for all preceding taxable years commencing with the first year 
such amounts were accumulated. An accumulation distribution of 
undistributed capital gain is a ``capital gain distribution'' (as 
defined in section 665(g)). To the extent an accumulation distribution 
exceeds the ``undistributed net income'' and ``undistributed capital 
gain'' so determined, it is deemed to consist of corpus.
    (3) The accumulation distribution is ``thrown back'' to the earliest 
``preceding taxable year'' of the trust, which, in the case of 
distributions made for a taxable year beginning after December 31, 1973, 
from a trust (other than a foreign trust created by a U.S. person), is 
any taxable year beginning after December 31, 1968. Special transitional 
rules apply for distributions made in taxable years beginning before 
January 1, 1974. In the case of a foreign trust created by a U.S. 
person, a ``preceding taxable year'' is any year of the trust to which 
the Code applies.
    (4) A distribution of undistributed net income (included in an 
accumulation distribution) and a capital gain distribution will be 
included in the income of the beneficiary in the year they are actually 
paid, credited, or required to be distributed to him. The tax on the 
distribution will be approximately the amount of tax the beneficiary 
would have paid with respect to the distribution had the income and 
capital gain been distributed to the beneficiary in the year earned by 
the trust. An additional amount equal to the ``taxes imposed on the 
trust'' for the preceding year is also deemed distributed. To prevent 
double taxation, however, the beneficiary receives a credit for such 
taxes.
    (b) Effective dates. All regulations sections under subpart D 
(sections 665 through 669) which have an ``A'' suffix (such as Sec. 
1.665(a)A and Sec. 1.666(b)-1A) are applicable to taxable years 
beginning on or after January 1, 1969, and all references therein to 
sections 665 through 669 are references to such sections as amended by 
the Tax Reform Act of 1969. Sections without the ``A'' suffix (such as 
Sec. 1.666(b)-1) are applicable only to taxable years beginning before 
January 1, 1969, and all references therein to sections 665 through 669 
are references to such sections before amendment by the Tax Reform Act 
of 1969.
    (c) Examples. Where examples contained in the regulations under 
subpart D refer to tax rates for years after 1968, such tax rates are 
not necessarily the actual rates for such years, but are only used for 
example purposes.
    (d) Applicability to estates. Subpart D does not apply to any 
estate.

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