[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(e)-1]

[Page 186-187]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.665(e)-1  Preceding taxable year.

    (a) Definition. For purposes of subpart D (section 665 and 
following), part I, subchapter J, chapter 1 of the Internal Revenue Code 
of 1954, the term preceding taxable year does not include any taxable 
year to which such part I does not apply. See section 683 and 
regulations thereunder. Accordingly, the provisions of such subpart D 
may not, in general, be applied to any taxable year which begins before 
1954 or ends before August 17, 1954. For example, if a trust (reporting 
on the calendar year basis) makes a distribution during the calendar 
year 1955 of income accumulated during prior years and the distribution 
exceeds the distributable net income of 1955, the excess distribution 
may be allocated under such subpart D to 1954, but it may not be 
allocated to 1953 and preceding years, since the Internal Revenue Code 
of 1939 applies to those years.
    (b) Simple trusts subject to subpart D. An accumulation distribution 
may be properly allocated to a preceding taxable year in which the trust 
qualified as a simple trust (that is, qualified for treatment under 
subpart B (section 651 and following) of such part I). In such event, 
the trust is treated for such preceding taxable year in all respects as 
if it were a trust to which subpart C (section 661 and following) of 
such part I applies. An example of such a circumstance would be in the 
case of a trust (required under the trust instrument to distribute all 
of its income currently) which received in the preceding taxable year 
extraordinary dividends or taxable stock dividends which the trustee in 
good faith allocated to corpus, but which are subsequently determined to 
be currently distributable to the beneficiary. See section 643(a)(4) and 
Sec. 1.643(a)-4. The trust would qualify for treatment under such 
subpart C for the year of distribution of the extraordinary dividends or 
taxable stock dividends, because the distribution is not out of income 
of the current taxable year and would be treated as other amounts 
properly paid or credited or required to be distributed for such taxable 
year within the meaning of section 661(a)(2). Also, in the case of a 
trust other than a foreign trust created by a U.S. person, the 
distribution

[[Page 187]]

would qualify as an accumulation distribution for the purposes of such 
subpart D if in excess of $2,000 and not excepted under section 665(b) 
and the regulations thereunder. In the case of a foreign trust created 
by a U.S. person, the distribution, regardless of the amount, would 
qualify as an accumulation distribution for the purposes of subpart D. 
For the purposes only of such subpart D, the trust would be treated as 
subject to the provisions of such subpart C for the preceding taxable 
year in which the extraordinary or taxable stock dividends were received 
and in computing undistributed net income for such preceding year, the 
extraordinary or taxable stock dividends would be included in 
distributable net income under section 643(a). The rule stated in the 
preceding sentence would also apply if the distribution in the later 
year were made out of corpus without regard to a determination that the 
extraordinary dividends or taxable stock dividends in question were 
currently distributable to the beneficiary.

[T.D. 6500, 25 FR 11814, Nov. 26, 1960, as amended by T.D. 6989, 34 FR 
735, Jan. 17, 1969. Redesignated by T.D. 6989, 34 FR 735, Jan. 17, 1969]