SEC. 642. SPECIAL RULES FOR CREDITS AND DEDUCTIONS (68A Stat. 215–217): (a) (3)--- -- Feb. 26, 1964, H.R. 8363, P.L. 88-272, § 201(d) (6) (A), 78 Stat. 32: (repealed) Amended Sec. 642(a) (relating to credits against tax allowable to estates and trusts) by striking out paragraph (3), which read as follows (68A Stat. 216): (e).. (i) (in full) "(3) DIVIDENDS RECEIVED BY INDIVIDUALS.-An estate or trust shall be allowed the credit against tax for dividends received provided by section 34 only in respect of so much of such dividends as is not properly allocable to any beneficiary under section 652 or 662. For purposes of determining the time of receipt of dividends under section 34 and section 116, the amount of dividends properly allocable to a beneficiary under section 652 or 662 shall be deemed to have been received by the beneficiary ratably on the same dates that the dividends were received by the estate or trust." Applicability: Dividends received after December 31, 1964, in taxable years ending after such date. (Id., § 201(e), 78 Stat. 33.) Oct. 16, 1962, H.R. 10650, P.L. 87-834, § 13(c) (2) (A), 76 Stat. 1034: "(e) DEDUCTION FOR DEPRECIATION AND DEPLETION.-An estate or trust shall be allowed the deduction for depreciation and depletion only to the extent not allowable to beneficiaries under sections 167(g) and 611 (b).", by striking out "167(g)" and inserting in lieu thereof "167(h)". Applicability: Taxable years beginning after December 31, 1961, and ending after the date of enactment-October 16, 1962. (Id., § 13(g), 76 Stat. 1036. See n. 51, p. 94 above.) Feb. 26, 1964, H.R. 8363, P.L. 88-272, § 201(d) (6) (B), 78 Stat. 32: "For disallowance of standard deduction in case of estates and trusts see section 142(b) (4).”, so as to read as follows: "(i) CROSS REFERENCES. "(1) For disallowance of standard deduction in case of estates and trusts, see section 142(b)(4). 66 "(2) For special rule for determining the time of receipt of divi dends by a beneficiary under section 652 or 662, see section 116(c) (3)." Applicability: Dividends received after December 31, 1964, in taxable years ending after such date. (Id., § 201(e), 78 Stat. 33.) SEC. 643. DEFINITIONS APPLICABLE TO SUBPARTS A, B, C, AND D (68A Stat. 217–218): (a)(6)_ (in full) (d).. (added) Oct. 16, 1962, H.R. 10650, P.L. 87-834, § 7(a) (1), 76 Stat. 985: Amended Sec. 643 (a) (6) 191 (distributable net income-foreign income) to read as follows: "(6) INCOME OF FOREIGN TRUST.-In the case of a foreign trust"(A) There shall be included the amounts of gross income from sources without the United States, reduced by any amounts which would be deductible in respect of disbursements allocable to such income but for the provisions of section 265(1) (relating to disallowance of certain deductions). "(B) Gross income from sources within the United States shall be determined without regard to section 894 (relating to income exempt under treaty). "(C) Paragraph (3) shall not apply to a foreign trust created by a United States person. In the case of such a trust, (i) there shall be included gains from the sale or exchange of capital assets, reduced by losses from such sales or exchanges to the extent such losses do not exceed gains from such sales or exchanges, and (ii) the deduction under section 1202 (relating to deduction for excess of capital gains over capital losses) shall not be taken into account." Oct. 16, 1962, H.R. 10650, P.L. 87-834, § 7(a) (2), 76 Stat. 985: Amended Sec. 643 (definitions) by adding at the end thereof, after subsection (c) (beneficiary), the following new subsection (d): "(d) FOREIGN TRUSTS CREATED BY UNITED STATES PERSONS.For purposes of this part, the term 'foreign trust created by a United States person' means that portion of a foreign trust (as defined in section 7701 (a) (31)) attributable to money or property transferred directly or indirectly by a United States person (as defined in section 7701(a) (30)), or under the will of a decedent who at the date of his death was a United States citizen or resident." CH. 1, SUBCH. J, PART I, SUBPART B-TRUSTS WHICH DIS- "Sec. 651. Deduction for trusts distributing current income only. "Sec. 652. Inclusion of amounts in gross income of beneficiaries of trusts distributing current income only." No amendments have been made to this table or to either of the sections listed therein. 191 Paragraph (6) of section 643(a) originally read as follows (68A Stat. 218): "(6) FOREIGN INCOME. In the case of a foreign trust, there shall be included the amounts of gross income from sources without the United States, reduced by any amounts which would be deductible in respect of disbursements allocable to such income but for the provisions of section 265(1) (relating to disallowance of certain deductions)." 192 Subsection (j) of section 7 of P.L. 87-834 provided as follows: "(j) EFFECTIVE DATE.-The amendments made by this section (other than by subsections (f), (g), and (h)) shall apply with respect to distributions made after December 31, 1962." Subsection (f) added a new section 6048, subsection (g) added a new section 6677, and subsection (h) added new paragraphs (30) (United States person) and (31) (foreign estate or trust) to Sec. 7701(a). These amendments are set forth in their appropriate context below. CH. 1, SUBCH. J, PART I, SUBPART C-ESTATES AND TRUSTS WHICH MAY ACCUMULATE INCOME OR WHICH DISTRIBUTE CORPUS (68A Stat. 220–223): NOTE: The table of sections for Subpart C of Part I of Subchapter J of Chapter 1 reads as follows (68A Stat. 220): "Sec. 661. Deductions for estates and trusts accumulating income or distributing corpus. "Sec. 662. Inclusion of amounts in gross income of beneficiaries of estates and trusts accumulating income or distributing corpus. "Sec. 663. Special rules applicable to sections 661 and 662." No amendments have been made to this table or to any of the sections listed therein. CH. 1, SUBCH. J, PART I, SUBPART D-TREATMENT OF EXCESS DISTRIBUTIONS BY TRUSTS (68A Stat. 223–226): Table (Sec. 669 added) Oct. 16, 1962, H.R. 10650, P.L. 87-834, § 7(i)(1), 76 Stat. 988: "Sec. 669. Special rules applicable to certain foreign trusts." SEC. 665. DEFINITIONS APPLICABLE TO SUBPART D (68A Stat. 223-224): Oct. 16, 1962, H.R. 10650, P.L. 87-834, § 7(b) (1), 76 Stat. 985: "(b) ACCUMULATION DISTRIBUTION. For purposes of this subpart," and inserting in lieu thereof "(b) ACCUMULATION DISTRIBUTIONS OF TRUSTS OTHER THAN CERTAIN FOREIGN TRUSTS.-For purposes of this subpart, in the case of a trust (other than a foreign trust created by a United States person),”. 193 The table of sections for Subpart D of Part I of Subchapter J of Chapter 1 originally read as follows (68A Stat. 223): "Sec. 665. Definitions applicable to subpart D. "Sec. 666. Accumulation distribution allocated to 5 preceding years. "Sec. 667. Denial of refund to trust. "Sec. 668. Treatment of amounts deemed distributed in preceding years." 194 Section 665 originally read as follows (68A Stat. 223–224): "SEC. 665. DEFINITIONS APPLICABLE TO SUBPART D. "(a) UNDISTRIBUTED NET INCOME.-For purposes of this subpart, the term 'undistributed net income' for any taxable year means the amount by which distributable net income of the trust for such taxable year exceeds the sum of "(1) the amounts for such taxable year specified in paragraphs (1) and (2) of section 661 (a); and "(2) the amount of taxes imposed on the trust. "(b) ACCUMULATION DISTRIBUTION.-For purposes of this subpart, the term 'accumulation distribution' for any taxable year of the trust means the amount (if in excess of $2,000) by which the amounts specified in paragraph (2) of section 661(a) for such taxable year exceed distributable net income reduced by the amounts specified in paragraph (1) of section 661(a). For purposes [Footnote 194 continued on following page] SEC. 665-Continued (c), (d), (e). Oct. 16, 1962, H.R. 10650, P.L. 87-834, § 7(b)(2), 76 Stat. 986: (redesignated, Amended Sec. 665 by redesignating subsections (c) and (d) as subsections (d) and (e), respectively, and by inserting after subsection (b) (as amended by P.L. 87-834, §7(b)(1)) the following new subsection (c): added) "(c) ACCUMULATION DISTRIBUTION OF CERTAIN FOREIGN TRUSTS. For purposes of this subpart, in the case of a foreign trust created by a United States person, the term 'accumulation distribution' for any taxable year of the trust means the amount by which the amounts specified in paragraph (2) of section 661 (a) for such taxable year exceed distributable net income, reduced by the amounts specified in paragraph (1) of section 661(a). For purposes of this subsection, the amount specified in paragraph (2) of section 661 (a) shall be determined without regard to section 666. Any amount paid to a United States person which is from a payor who is not a United States person and which is derived directly or indirectly from a foreign trust created by a United States person shall be deemed in the year of payment to have been directly paid by the foreign trust." Applicability: Distributions made after December 31, 1962, (Id., § 7(j), 76 Stat. 989. See n. 192, p. 327 above.) Footnote 194-Continued. of this subsection, the amount specified in paragraph (2) of scetion 661 (a) shall be determined without regard to section 666 and shall not include "(1) amounts paid, credited, or required to be distributed to a beneficiary as income accumulated before the birth of such beneficiary or before such beneficiary attains the age of 21; "(2) amounts properly paid or credited to a beneficiary to meet the emergency needs of such beneficiary; "(3) amounts properly paid or credited to a beneficiary upon such beneficiary's attaining a specified age or ages if— "(A) the total number of such distributions cannot exceed 4 with respect to such beneficiary, (B) the period between each such distribution to such beneficiary is 4 years or more, and "(C) as of January 1, 1954, such distributions are required by the specific terms of the governing instrument; and "(4) amounts properly paid or credited to a beneficiary as a final distribution of the trust if such final distribution is made more than 9 years after the date of the last transfer to such trust. "(c) TAXES IMPOSED ON THE TRUST.-For purposes of this subpart, the term 'taxes imposed on the trust' means the amount of the taxes which are imposed for any taxable year on the trust under this chapter (without regard to this subpart) and which, under regulations prescribed by the Secretary or his delegate, are properly allocable to the undistributed portion of the distributable net income. The amount determined in the preceding sentence shall be reduced by any amount of such taxes allowed, under sections 667 and 668, as a credit to any beneficiary on account of any accumulation distribution determined for any taxable year. (d) PRECEDING TAXABLE YEAR.-For purposes of this subpart, the term 'preceding taxable year' does not include any taxable year of the trust to which this part does not apply. In the case of a preceding taxable year with respect to which a trust qualifies (without regard to this subpart) under the provisions of subpart B, for purposes of the application of this subpart to such trust for such taxable year, such trust shall, in accordance with regulations prescribed by the Secretary or his delegate, be treated as a trust to which subpart C applies." SEC. 666. ACCUMULATION DISTRIBUTION ALLOCATED TO 5 PRECEDING YEARS (68A Stat. 224-225): (a)____ (1st sen❜ce, sen'ce added) Oct. 16, 1962, H.R. 10650, P.L. 87-834, § 7(c) (1), (2), 76 Stat. 986: 195 (1) by striking out "(a) AMOUNT ALLOCATED.-In the case of a trust" and inserting in lieu thereof the following: "(a) AMOUNT ALLOCATED.-In the case of a trust (other than a foreign trust created by a United States person)"; and (2) by adding at the end thereof the following new sentence: "In the case of a foreign trust created by a United States person, this subsection shall apply to the preceding taxable years of the trust without regard to any provision of the preceding sentences which would (but for this sentence) limit its application to the 5 preceding taxable years." Applicability: Distributions made after December 31, 1962. (Id., § 7(j), 76 Stat. 989. See n. 192, p. 327 above.) SEC. 668. TREATMENT OF AMOUNTS DEEMED DISTRIBUTED IN PRECEDING YEARS (68A Stat. 225): (a)-(sen'ce added) Oct. 16, 1962, H.R. 10650, P.L. 87-834, § 7(d), 76 Stat. 986: Amended Sec. 668(a) 196 by adding at the end thereof the following new sentence: "Except as provided in section 669, in the case of a foreign trust created by a United States person the preceding sentence shall not apply to any beneficiary who is a United States person." Applicability: Distributions made after December 31, 1962. (Id., § 7(j), 76 Stat. 989. See n. 192, p. 327 above.) 195 Subsection (a) of section 666 originally read as follows (68A Stat. 224): "(a) AMOUNT ALLOCATED. In the case of a trust which for a taxable year beginning after December 31, 1953, is subject to subpart C, the amount of the accumulation distribution of such trust for such taxable year shall be deemed to be an amount within the meaning of paragraph (2) of section 661 (a) distributed on the last day of each of the 5 preceding taxable years to the extent that such amount exceeds the total of any undistributed net incomes for any taxable years intervening between the taxable year with respect to which the accumulation distribution is determined and such preceding taxable year. The amount deemed to be distributed in any such preceding taxable year under the preceding sentence shall not exceed the undistributed net income of such preceding taxable year. For purposes of this subsection, undistributed net income for each of such 5 preceding taxable years shall be computed without regard to such accumulation distribution and without regard to any accumulation distribution determined for any succeeding taxable year." 196 Subsection (a) of section 668 originally read as follows (68A Stat. 225): "(a) AMOUNTS TREATED AS RECEIVED IN PRIOR TAXABLE YEARS.-The total of the amounts which are treated under section 666 as having been distributed by the trust in a preceding taxable year shall be included in the income of a beneficiary or beneficiaries of the trust when paid, credited, or required to be distributed to the extent that such total would have been included in the income of such beneficiary or beneficiaries under section 662 (a) (2) and (b) if such total had been paid to such beneficiary or beneficiaries on the last day of such preceding taxable year. The portion of such total included under the preceding sentence in the income of any beneficiary shall be based upon the same ratio as determined under the second sentence of ection 662 (a) (2) for the taxable year in respect of which the accumulation distribution is determined, except that proper adjustment of such ratio shall be made, in accordance with regulations prescribed by the Secretary or his delegate, for amounts which fall within paragraphs (1) through (4) of section 665 (b). The tax of the beneficiaries attributable to the amounts treated as having been received on the last day of such preceding taxable year of the trust shall not be greater than the aggregate of the taxes attributable to those amounts had they been included in the gross income of the beneficiaries on such day in accordance with section 662 (a) (2) and (b).” |