[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: 26CFR1.669(c)-2A]

[Page 225-226]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.669(c)-2A  Computation of the beneficiary's income and tax for 
a prior taxable year.

    (a) Basis for computation. (1) The beneficiary's income and tax paid 
for any prior taxable year for which a recomputation is involved under 
either the exact method or the short-cut method shall be determined by 
reference to the information required to be furnished by him under Sec. 
1.669(c)-3A(a). The gross income, related deductions, and taxes paid for 
a prior taxable year of the beneficiary as finally determined shall be 
used for recomputation purposes. The term as finally determined shall 
have the same meaning for purposes of this section as in Sec. 1.668(b)-
3A(a).
    (2) If any computations rely on the beneficiary's return for a prior 
taxable year for which the applicable period of limitations on 
assessment under section 6501 has expired, and such return shows a 
mathematical error on its face which resulted in the wrong amount of tax 
being paid for such year, the determination of both the tax for such 
year computed with the inclusion of the section 669 amounts in the 
beneficiary's gross income, and the tax for such year computed without 
including such amounts in such gross income, shall be based upon the 
return after the correction of such mathematical errors.
    (b) Effect of allocation of undistributed capital gain on items 
based on amount of income and with respect to a net operating loss, a 
charitable contributions carryover, or a capital loss carryover. (1) In 
computing the tax for any taxable year under either the exact method or 
the short-cut method, any item which depends upon the amount of gross 
income, adjusted gross income, or taxable income shall be recomputed to 
take into consideration the amount of undistributed capital gain 
allocated to such year. For example, if $2,000 of undistributed long-
term capital gain is allocated to 1970, adjusted gross income for 1970 
is increased from $5,000 to $6,000. The allowable 50 percent charitable 
deduction under section 170(b)(1)(A) is then increased and the

[[Page 226]]

amount of the nondeductible medical expenses under section 213 (3 
percent of adjusted gross income) is also increased.
    (2) In computing the tax attributable to the undistributed capital 
gain deemed distributed to the beneficiary in any of his prior taxable 
years under either the exact method or the short-cut method, the effect 
of amounts of undistributed capital gain on a net operating loss 
carryback or carryover, a charitable contributions carryover, or a 
capital loss carryback or carryover, shall be taken into account. In 
determining the amount of tax attributable to such deemed distribution, 
a computation shall also be made for any taxable year which is affected 
by a net operating loss carryback or carryover, by a charitable 
contributions carryover, or by a capital loss carryback or carryover 
determined by reference to the taxable year to which amounts are 
allocated under either method and which carryback or carryover is 
reduced or increased by such amounts so allocated.

[T.D. 7204, 37 FR 17155, Aug. 25, 1972]