[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: 26CFR1.668(a)-2A]

[Page 203]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.668(a)-2A  Allocation among beneficiaries; in general.

    The portion of the total amount includible in income under Sec. 
1.668(a)-1A which is includible in the income of a particular 
beneficiary is based upon the ratio determined under the second sentence 
of section 662(a)(2) for the taxable year (and not for the preceding 
taxable year). This section may be illustrated by the following example:

    Example. (a) Under the terms of a trust instrument, the trustee may 
accumulate the income or make distributions to A and B. The trustee may 
also invade corpus for the benefit of A and B. The distributable net 
income of the trust for taxable year 1975 is $10,000. The trust had 
undistributed net income for taxable year 1973, the first year of the 
trust, of $5,000, to which a tax of $1,100 was allocable. On May 1, 
1975, the trustee distributes $10,000 to A, and on November 29, 1975, he 
distributes $5,000 to B. Thus, of the total distribution of $15,000, A 
received two-thirds and B receives one-third.
    (b) For the purposes of determining the amounts includible in the 
beneficiaries' gross income for 1975, the trust is deemed to have made 
the following distributions:

Amount distributed out of 1975 income (distributable net         $10,000
 income).....................................................
Accumulation distribution deemed distributed by the trust on       5,000
 the last day of 1973 under section 666(a)...................
Taxes imposed on the trust attributable to the undistributed       1,100
 net income deemed distributed under section 666(b)..........


    (c) A will include in his income for 1975 two-thirds of each item 
shown in paragraph (b) of this example. Thus, he will include in gross 
income $6,666.67 (10,000/15,000x $10,000) of the 1975 distributable net 
income of the trust as provided in section 662(a)(2) (which is not an 
amount includable in his income under Sec. 1.668(a)-1A(a)). He will 
include in his income $3,333.33 (10,000/15,000x$5,000) of the 
accumulation distribution and $733.33 (10,000/15,000x $1,100) of the 
taxes imposed on the trust, as provided in section 668(a).
    (d) B will include in his income for 1975 one-third of each item 
shown in paragraph (b) of this example, computed in the manner shown in 
paragraph (c) of this example.
    (e) To the extent the total accumulation distribution consists of 
undistributed net income and undistributed capital gain, A and B shall 
be treated as receiving a pro rata share of each for the preceding 
taxable year 1973.

[T.D. 7204, 37 FR 17148, Aug. 25, 1972]