CFR / Title 26 / Part 1 / Sec. 1.664-4 Calculation of the fair market value of the remainder

(a) Rules for determining present value. For purposes of sections 170, 2055, 2106, and 2522, the fair market value of a remainder interest in a charitable remainder unitrust (as described in Sec. 1.664-3) is its present value determined under paragraph (d) of this section. The present value determined under this section shall be computed on the basis of--

(1) Life contingencies determined as to each life involved, from the values of lx set forth in Table 2000CM contained in Sec. 20.2031-7(d)(7) of this chapter in the case of transfers for which the valuation date is on or after May 1, 2009; or from Table 90CM contained in Sec. 20.2031-7A(f)(4) in the case of transfers for which the valuation date is after April 30, 1999, and before May 1, 2009. See Sec. 20.2031-7A(a) through (e), whichever is applicable, for transfers for which the valuation date is before May 1, 1999;

(2) Interest at the section 7520 rate in the case of transfers for which the valuation date is after April 30, 1989, or 10 percent in the case of transfers to charitable remainder unitrusts made after November 30, 1983, for which the valuation date is before May 1, 1989. See Sec. 20.2031-7A (a) through (c) of this chapter, whichever is applicable, for transfers for which the valuation date is before December 1, 1983; and

(3) The assumption that the amount described in Sec. 1.664-3(a)(1)(i)(a) is distributed in accordance with the payout sequence described in the governing instrument. If the governing instrument does not prescribe when the distribution is made during the period for which the payment is made, for purposes of this section, the distribution is considered payable on the first day of the period for which the payment is made.

(b) Actuarial Computations by the Internal Revenue Service. The regulations in this and in related sections provide tables of actuarial factors and examples that illustrate the use of the tables in determining the value of remainder interests in property. Section 1.7520-1(c)(2) refers to government publications that provide additional tables of factors and examples of computations for more complex situations. If the computation requires the use of a factor that is not provided in this section, the Commissioner may supply the factor upon a request for a ruling. A request for a ruling must be accompanied by a recitation of the facts including the date of birth of each measuring life, and copies of the relevant documents. A request for a ruling must comply with the instructions for requesting a ruling published periodically in the Internal Revenue Bulletin (See Sec. 601.601(d)(2)(ii)(b) of this chapter) and include payment of the required user fee. If the Commissioner furnishes the factor, a copy of the letter supplying the factor should be attached to the tax return in which the deduction is claimed. If the Commissioner does not furnish the factor, the taxpayer must furnish a factor computed in accordance with the principles set forth in this section.

(c) Statement supporting deduction required. Any claim for a deduction on any return for the value of a remainder interest in a charitable remainder unitrust must be supported by a full statement attached to the return showing the computation of the present value of such interest.

(d) Valuation. The fair market value of a remainder interest in a charitable remainder unitrust (as described in Sec. 1.664-3) for transfers for which the valuation date is on or after May 1, 2009, is its present value determined under paragraph (e) of this section. The fair market value of a remainder interest in a charitable remainder unitrust (as described in Sec. 1.664-3) for transfers for which the valuation date is before May 1, 2009, is its present value determined under the following sections: ------------------------------------------------------------------------

Valuation dates--------------------------------------------------------- Applicable

After Before regulations--------------------------------------------------------------------------......................................... 01-01-52 1.664-4A(a)12-31-51................................... 01-01-71 1.664-4A(b)12-31-70................................... 12-01-83 1.664-4A(c)11-30-83................................... 05-01-89 1.664-4A(d)04-30-89................................... 05-01-99 1.664-4A(e)04-30-99................................... 05-01-09 1.664-4A(f)------------------------------------------------------------------------

(e) Valuation of charitable remainder unitrusts having certain payout sequences for transfers for which the valuation date is on or after May 1, 2009--(1) In general. Except as otherwise provided in paragraph (e)(2) of this section, in the case of transfers for which the valuation date is on or after May 1, 2009, the present value of a remainder interest is determined under paragraphs (e)(3) through (e)(7) of this section, provided that the amount of the payout as of any payout date during any taxable year of the trust is not larger than the amount that the trust could distribute on such date under Sec. 1.664-3(a)(1)(v) if the taxable year of the trust were to end on such date. See, however, Sec. 1.7520-3(b) (relating to exceptions to the use of the prescribed tables under certain circumstances).

(1) In general. Except as otherwise provided in paragraph (e)(2) of this section, in the case of transfers for which the valuation date is on or after May 1, 2009, the present value of a remainder interest is determined under paragraphs (e)(3) through (e)(7) of this section, provided that the amount of the payout as of any payout date during any taxable year of the trust is not larger than the amount that the trust could distribute on such date under Sec. 1.664-3(a)(1)(v) if the taxable year of the trust were to end on such date. See, however, Sec. 1.7520-3(b) (relating to exceptions to the use of the prescribed tables under certain circumstances).

(2) Transitional rules for valuation of charitable remainder unitrusts. (i) For purposes of sections 2055, 2106, or 2624, if on May 1, 2009, the decedent was mentally incompetent so that the disposition of the property could not be changed, and the decedent died on or after May 1, 2009, without having regained competency to dispose of the decedent's property, or the decedent died within 90 days of the date that the decedent first regained competency on or after May 1, 2009, the present value of a remainder interest under this section is determined as if the valuation date with respect to the decedent's gross estate is either before or after May 1, 2009, at the option of the decedent's executor.

(i) For purposes of sections 2055, 2106, or 2624, if on May 1, 2009, the decedent was mentally incompetent so that the disposition of the property could not be changed, and the decedent died on or after May 1, 2009, without having regained competency to dispose of the decedent's property, or the decedent died within 90 days of the date that the decedent first regained competency on or after May 1, 2009, the present value of a remainder interest under this section is determined as if the valuation date with respect to the decedent's gross estate is either before or after May 1, 2009, at the option of the decedent's executor.

(ii) For purposes of sections 170, 2055, 2106, 2522, or 2624, in the case of transfers to a charitable remainder unitrust for which the valuation date is on or after May 1, 2009, and before July 1, 2009, the present value of a remainder interest based on one or more measuring lives is determined under this section by use of the section 7520 interest rate for the month in which the valuation date occurs (see Sec. Sec. 1.7520-1(b) and 1.7520-2(a)(2)) and the appropriate actuarial tables under either paragraph (e)(7) of this section or Sec. 1.664-4A(f)(6), at the option of the donor or the decedent's executor, as the case may be.

(iii) For purposes of paragraphs (e)(2)(i) and (e)(2)(ii) of this section, where the donor or decedent's executor is given the option to use the appropriate actuarial tables under either paragraph (e)(7) of this section or Sec. 1.664-4A(f)(6), the donor or decedent's executor must use the same actuarial table with respect to each individual transaction and with respect to all transfers occurring on the valuation date (for example, gift and income tax charitable deductions with respect to the same transfer must be determined based on the same tables, and all assets includible in the gross estate and/or estate tax deductions claimed must be valued based on the same tables).

(3) Adjusted payout rate. For transfers for which the valuation date is after April 30, 1989, the adjusted payout rate is determined by using the appropriate Table F in paragraph (e)(6) of this section, for the section 7520 interest rate applicable to the transfer. If the interest rate is between 4.2 and 14 percent, see paragraph (e)(6) of this section. If the interest rate is below 4.2 percent or greater than 14 percent, see paragraph (b) of this section. The adjusted payout rate is determined by multiplying the fixed percentage described in Sec. 1.664-3(a)(1)(i)(a) by the factor describing the payout sequence of the trust and the number of months by which the valuation date for the first full taxable year of the trust precedes the first payout date for such taxable year. If the governing instrument does not prescribe when the distribution or distributions shall be made during the taxable year of the trust, see paragraph (a) of this section. In the case of a trust having a payout sequence for which no figures have been provided by the appropriate table, and in the case of a trust that determines the fair market value of the trust assets by taking the average of valuations on more than one date during the taxable year, see paragraph (b) of this section.

(4) Period is a term of years. If the period described in Sec. 1.664-3(a)(5) is a term of years, the factor that is used in determining the present value of the remainder interest for transfers for which the valuation date is after November 30, 1983, is the factor under the appropriate adjusted payout rate in Table D of paragraph (e)(6) of this section corresponding to the number of years in the term. If the adjusted payout rate is an amount that is between adjusted payout rates for which factors are provided in Table D, a linear interpolation must be made. The present value of the remainder interest is determined by multiplying the net fair market value (as of the appropriate valuation date) of the property placed in trust by the factor determined under this paragraph. For purposes of this section, the valuation date is, in the case of an inter vivos transfer, the date on which the property is transferred to the trust by the donor. However, if an election is made under section 7520 and Sec. 1.7520-2(b) to compute the present value of the charitable interest by use of the interest rate component for either of the 2 months preceding the month in which the date of transfer falls, the month so elected is the valuation date for purposes of determining the interest rate and mortality tables. In the case of a testamentary transfer under section 2055, 2106, or 2624, the valuation date is the date of death, unless the alternate valuation date is elected under section 2032, in which event, and within the limitations set forth in section 2032 and the regulations thereunder, the valuation date is the alternate valuation date. If the decedent's estate elects the alternate valuation date under section 2032 and also elects, under section 7520 and Sec. 1.7520-2(b), to use the interest rate component for one of the 2 months preceding the alternate valuation date, the month so elected is the valuation date for purposes of determining the interest rate and mortality tables. The application of this paragraph (e)(4) may be illustrated by the following example:

Example. D transfers $100,000 to a charitable remainder unitrust on January 1. The trust instrument requires that the trust pay 8 percent of the fair market value of the trust assets as of January 1st for a term of 12 years to D in quarterly payments (March 31, June 30, September 30, and December 31). The section 7520 rate for January (the month that the transfer occurred) is 9.6 percent. Under Table F(9.6) in paragraph (e)(6) of this section, the appropriate adjustment factor is .944628 for quarterly payments payable at the end of each quarter. The adjusted payout rate is 7.557 (8%x .944628). Based on the remainder factors in Table D in paragraph (e)(6) of this section, the present value of the remainder interest is $38,950.30, computed as follows: Factor at 7.4 percent for 12 years........................... .397495Factor at 7.6 percent for 12 years........................... .387314

----------

Difference................................................. .010181

Interpolation adjustment:

[GRAPHIC] [TIFF OMITTED] TR12JN00.002

Factor at 7.4 percent for 12 years........................... .397495Less: Interpolation adjustment............................... .007992

----------

Interpolated factor........................................ .389503

Present value of remainder interest: ($100,000x.389503)..........$38,950.30

(5) Period is the life of one individual. (i) If the period described in Sec. 1.664-3(a)(5) is the life of one individual, the factor that is used in determining the present value of the remainder interest for transfers for which the valuation date is on or after May 1, 2009, is the factor in Table U(1) in paragraph (e)(7) of this section under the appropriate adjusted payout. For purposes of the computations described in this paragraph (e)(5), the age of an individual is the age of that individual at the individual's nearest birthday. If the adjusted payout rate is an amount that is between adjusted payout rates for which factors are provided in the appropriate table, a linear interpolation must be made. The present value of the remainder interest is determined by multiplying the net fair market value (as of the valuation date as determined in paragraph (e)(4) of this section) of the property placed in trust by the factor determined under this paragraph (e)(5). If the adjusted payout rate is between 4.2 and 14 percent, see paragraph (e)(7) of this section. If the adjusted payout rate is below 4.2 percent or greater than 14 percent, see paragraph (b) of this section.

(i) If the period described in Sec. 1.664-3(a)(5) is the life of one individual, the factor that is used in determining the present value of the remainder interest for transfers for which the valuation date is on or after May 1, 2009, is the factor in Table U(1) in paragraph (e)(7) of this section under the appropriate adjusted payout. For purposes of the computations described in this paragraph (e)(5), the age of an individual is the age of that individual at the individual's nearest birthday. If the adjusted payout rate is an amount that is between adjusted payout rates for which factors are provided in the appropriate table, a linear interpolation must be made. The present value of the remainder interest is determined by multiplying the net fair market value (as of the valuation date as determined in paragraph (e)(4) of this section) of the property placed in trust by the factor determined under this paragraph (e)(5). If the adjusted payout rate is between 4.2 and 14 percent, see paragraph (e)(7) of this section. If the adjusted payout rate is below 4.2 percent or greater than 14 percent, see paragraph (b) of this section.

(ii) The application of paragraph (e)(5)(i) of this section may be illustrated by the following example:

Example. A, who is 44 years and 11 months old, transfers $100,000 to a charitable remainder unitrust on January 1st. The trust instrument requires that the trust pay to A semiannually (on June 30 and December 31) 8 percent of the fair market value of the trust assets as of January 1st during A's life. The section 7520 rate for January is 6.6 percent. Under Table F(6.6) in paragraph (e)(6) of this section, the appropriate adjustment factor is .953317 for semiannual payments payable at the end of the semiannual period. The adjusted payout rate is 7.627% (8% x .953317). Based on the remainder factors in Table U(1) in this section, the present value of the remainder interest is $11,075.00, computed as follows: [GRAPHIC] [TIFF OMITTED] TR10AU11.023

(6) Actuarial Table D and F (4.2 through 14.0) for transfers for which the valuation date is after April 30, 1989. For transfers for which the valuation date is after April 30, 1989, the present value of a charitable remainder unitrust interest that is dependent upon a term of years is determined by using the section 7520 rate and the tables in this paragraph (e)(6). For transfers for which the valuation date is on or after May 1, 2009, where the present value of a charitable remainder unitrust interest is dependent on the termination of a life interest, see Paragraph (e)(5) of this section. See, however, Sec. 1.7520-3(b) (relating to exceptions to the use of prescribed tables under certain circumstances). Many actuarial factors not contained in the following tables are contained in Internal Revenue Service Publication 1458, ``Actuarial Valuations Version 3B'' (2009). This publication will be available beginning May 1, 2009, at no charge, electronically via the IRS Internet site at http://www.irs.gov.

Table D--Showing the Present Worth of a Remainder Interest Postponed for a Term Certain in a Charitable Remainder Unitrust

[Applicable after April 30, 1989]--------------------------------------------------------------------------------------------------------------------------------------------------------

Adjusted payout rate

Years ---------------------------------------------------------------------------------------------------

4.2% 4.4% 4.6% 4.8% 5.0% 5.2% 5.4% 5.6% 5.8% 6.0%--------------------------------------------------------------------------------------------------------------------------------------------------------1................................................... .958000 .956000 .954000 .952000 .950000 .948000 .946000 .944000 .942000 .9400002................................................... .917764 .913936 .910116 .906304 .902500 .898704 .894916 .891136 .887364 .8836003................................................... .879218 .873723 .868251 .862801 .857375 .851971 .846591 .841232 .835897 .8305844................................................... .842291 .835279 .828311 .821387 .814506 .807669 .800875 .794123 .787415 .7807495................................................... .806915 .798527 .790209 .781960 .773781 .765670 .757627 .749652 .741745 .7339046................................................... .773024 .763392 .753859 .744426 .735092 .725855 .716716 .707672 .698724 .6898707................................................... .740557 .729802 .719182 .708694 .698337 .688111 .678013 .668042 .658198 .6484788................................................... .709454 .697691 .686099 .674677 .663420 .652329 .641400 .630632 .620022 .6095699................................................... .679657 .666993 .654539 .642292 .630249 .618408 .606765 .595317 .584061 .57299510.................................................. .651111 .637645 .624430 .611462 .598737 .586251 .573999 .561979 .550185 .53861511.................................................. .623764 .609589 .595706 .582112 .568800 .555766 .543003 .530508 .518275 .50629812.................................................. .597566 .582767 .568304 .554170 .540360 .526866 .513681 .500800 .488215 .475920

13.................................................. .572469 .557125 .542162 .527570 .513342 .499469 .485942 .472755 .459898 .44736514.................................................. .548425 .532611 .517222 .502247 .487675 .473496 .459701 .446281 .433224 .42052315.................................................. .525391 .509177 .493430 .478139 .463291 .448875 .434878 .421289 .408097 .39529216.................................................. .503325 .486773 .470732 .455188 .440127 .425533 .411394 .397697 .384427 .37157417.................................................. .482185 .465355 .449079 .433339 .418120 .403405 .389179 .375426 .362131 .34928018.................................................. .461933 .444879 .428421 .412539 .397214 .382428 .368163 .354402 .341127 .32832319.................................................. .442532 .425304 .408714 .392737 .377354 .362542 .348282 .334555 .321342 .30862420.................................................. .423946 .406591 .389913 .373886 .358486 .343690 .329475 .315820 .302704 .290106--------------------------------------------------------------------------------------------------------------------------------------------------------

Table D--Showing the Present Worth of a Remainder Interest Postponed for a Term Certain in a Charitable Remainder Unitrust

[Applicable after April 30, 1989]--------------------------------------------------------------------------------------------------------------------------------------------------------

Adjusted payout rate

Years ---------------------------------------------------------------------------------------------------

6.2% 6.4% 6.6% 6.8% 7.0% 7.2% 7.4% 7.6% 7.8% 8.0%--------------------------------------------------------------------------------------------------------------------------------------------------------1................................................... .938000 .936000 .934000 .932000 .930000 .928000 .926000 .924000 .922000 .9200002................................................... .879844 .876096 .872356 .868624 .864900 .861184 .857476 .853776 .850084 .8464003................................................... .825294 .820026 .814781 .809558 .804357 .799179 .794023 .788889 .783777 .7786884................................................... .774125 .767544 .761005 .754508 .748052 .741638 .735265 .728933 .722643 .7163935................................................... .726130 .718421 .710779 .703201 .695688 .688240 .680855 .673535 .666277 .6590826................................................... .681110 .672442 .663867 .655383 .646990 .638687 .630472 .622346 .614307 .6063557................................................... .638881 .629406 .620052 .610817 .601701 .592701 .583817 .575048 .566391 .5578478................................................... .599270 .589124 .579129 .569282 .559582 .550027 .540615 .531344 .522213 .5132199................................................... .562115 .551420 .540906 .530571 .520411 .510425 .500609 .490962 .481480 .47216110.................................................. .527264 .516129 .505206 .494492 .483982 .473674 .463564 .453649 .443925 .43438811.................................................. .494574 .483097 .471863 .460866 .450104 .439570 .429260 .419171 .409298 .39963712.................................................. .463910 .452179 .440720 .429527 .418596 .407921 .397495 .387314 .377373 .36766613.................................................. .435148 .423239 .411632 .400320 .389295 .378550 .368081 .357879 .347938 .33825314.................................................. .408169 .396152 .384465 .373098 .362044 .351295 .340843 .330680 .320799 .31119315.................................................. .382862 .370798 .359090 .347727 .336701 .326002 .315620 .305548 .295777 .28629716.................................................. .359125 .347067 .335390 .324082 .313132 .302529 .292264 .282326 .272706 .26339417.................................................. .336859 .324855 .313254 .302044 .291213 .280747 .270637 .260870 .251435 .24232218.................................................. .315974 .304064 .292579 .281505 .270828 .260533 .250610 .241044 .231823 .22293619.................................................. .296383 .284604 .273269 .262363 .251870 .241775 .232065 .222724 .213741 .20510120.................................................. .278008 .266389 .255233 .244522 .234239 .224367 .214892 .205797 .197069 .188693--------------------------------------------------------------------------------------------------------------------------------------------------------

Table D--Showing the Present Worth of a Remainder Interest Postponed for a Term Certain in a Charitable Remainder Unitrust

[Applicable after April 30, 1989]--------------------------------------------------------------------------------------------------------------------------------------------------------

Adjusted payout rate

Years ---------------------------------------------------------------------------------------------------

8.2% 8.4% 8.6% 8.8% 9.0% 9.2% 9.4% 9.6% 9.8% 10.0%--------------------------------------------------------------------------------------------------------------------------------------------------------1................................................... .918000 .916000 .914000 .912000 .910000 .908000 .906000 .904000 .902000 .9000002................................................... .842724 .839056 .835396 .831744 .828100 .824464 .820836 .817216 .813604 .8100003................................................... .773621 .768575 .763552 .758551 .753571 .748613 .743677 .738763 .733871 .7290004................................................... .710184 .704015 .697886 .691798 .685750 .679741 .673772 .667842 .661951 .6561005................................................... .651949 .644878 .637868 .630920 .624032 .617205 .610437 .603729 .597080 .5904906................................................... .598489 .590708 .583012 .575399 .567869 .560422 .553056 .545771 .538566 .5314417................................................... .549413 .541089 .532873 .524764 .516761 .508863 .501069 .493377 .485787 .4782978................................................... .504361 .495637 .487046 .478585 .470253 .462048 .453968 .446013 .438180 .4304679................................................... .463003 .454004 .445160 .436469 .427930 .419539 .411295 .403196 .395238 .38742010.................................................. .425037 .415867 .406876 .398060 .389416 .380942 .372634 .364489 .356505 .34867811.................................................. .390184 .380934 .371885 .363031 .354369 .345895 .337606 .329498 .321567 .31381112.................................................. .358189 .348936 .339902 .331084 .322475 .314073 .305871 .297866 .290054 .28243013.................................................. .328817 .319625 .310671 .301949 .293453 .285178 .277119 .269271 .261628 .25418714.................................................. .301854 .292777 .283953 .275377 .267042 .258942 .251070 .243421 .235989 .22876815.................................................. .277102 .268184 .259533 .251144 .243008 .235119 .227469 .220053 .212862 .20589116.................................................. .254380 .245656 .237213 .229043 .221137 .213488 .206087 .198928 .192001 .18530217.................................................. .233521 .225021 .216813 .208887 .201235 .193847 .186715 .179830 .173185 .16677218.................................................. .214372 .206119 .198167 .190505 .183124 .176013 .169164 .162567 .156213 .15009519.................................................. .196794 .188805 .181125 .173741 .166643 .159820 .153262 .146960 .140904 .135085

20.................................................. .180657 .172946 .165548 .158452 .151645 .145117 .138856 .132852 .127096 .121577--------------------------------------------------------------------------------------------------------------------------------------------------------

Table D--Showing the Present Worth of a Remainder Interest Postponed for a Term Certain in a Charitable Remainder Unitrust

[Applicable after April 30, 1989]--------------------------------------------------------------------------------------------------------------------------------------------------------

Adjusted payout rate

Years ---------------------------------------------------------------------------------------------------

10.2% 10.4% 10.6% 10.8% 11.0% 11.2% 11.4% 11.6% 11.8% 12.0%--------------------------------------------------------------------------------------------------------------------------------------------------------1................................................... .898000 .896000 .894000 .892000 .890000 .888000 .886000 .884000 .882000 .8800002................................................... .806404 .802816 .799236 .795664 .792100 .788544 .784996 .781456 .777924 .7744003................................................... .724151 .719323 .714517 .709732 .704969 .700227 .695506 .690807 .686129 .6814724................................................... .650287 .644514 .638778 .633081 .627422 .621802 .616219 .610673 .605166 .5996955................................................... .583958 .577484 .571068 .564708 .558406 .552160 .545970 .539835 .533756 .5277326................................................... .524394 .517426 .510535 .503720 .496981 .490318 .483729 .477214 .470773 .4644047................................................... .470906 .463613 .456418 .449318 .442313 .435402 .428584 .421858 .415222 .4086768................................................... .422874 .415398 .408038 .400792 .393659 .386637 .379726 .372922 .366226 .3596359................................................... .379741 .372196 .364786 .357506 .350356 .343334 .336437 .329663 .323011 .31647810.................................................. .341007 .333488 .326118 .318896 .311817 .304881 .298083 .291422 .284896 .27850111.................................................. .306224 .298805 .291550 .284455 .277517 .270734 .264102 .257617 .251278 .24508112.................................................. .274989 .267729 .260645 .253734 .246990 .240412 .233994 .227734 .221627 .21567113.................................................. .246941 .239886 .233017 .226331 .219821 .213486 .207319 .201317 .195475 .18979114.................................................. .221753 .214937 .208317 .201887 .195641 .189575 .183684 .177964 .172409 .16701615.................................................. .199134 .192584 .186236 .180083 .174121 .168343 .162744 .157320 .152065 .14697416.................................................. .178822 .172555 .166495 .160634 .154967 .149488 .144191 .139071 .134121 .12933717.................................................. .160582 .154609 .148846 .143286 .137921 .132746 .127754 .122939 .118295 .11381718.................................................. .144203 .138530 .133069 .127811 .122750 .117878 .113190 .108678 .104336 .10015919.................................................. .129494 .124123 .118963 .114007 .109247 .104676 .100286 .096071 .092024 .08814020.................................................. .116286 .111214 .106353 .101694 .097230 .092952 .088853 .084927 .081166 .077563--------------------------------------------------------------------------------------------------------------------------------------------------------

Table D--Showing the Present Worth of a Remainder Interest Postponed for a Term Certain in a Charitable Remainder Unitrust

[Applicable after April 30, 1989]--------------------------------------------------------------------------------------------------------------------------------------------------------

Adjusted payout rate

Years ---------------------------------------------------------------------------------------------------

12.2% 12.4% 12.6% 12.8% 13.0% 13.2% 13.4% 13.6% 13.8% 14.0%--------------------------------------------------------------------------------------------------------------------------------------------------------1................................................... .878000 .876000 .874000 .872000 .870000 .868000 .866000 .864000 .862000 .8600002................................................... .770884 .767376 .763876 .760384 .756900 .753424 .749956 .746496 .743044 .7396003................................................... .676836 .672221 .667628 .663055 .658503 .653972 .649462 .644973 .640504 .6360564................................................... .594262 .588866 .583507 .578184 .572898 .567648 .562434 .557256 .552114 .5470085................................................... .521762 .515847 .509985 .504176 .498421 .492718 .487068 .481469 .475923 .4704276................................................... .458107 .451882 .445727 .439642 .433626 .427679 .421801 .415990 .410245 .4045677................................................... .402218 .395848 .389565 .383368 .377255 .371226 .365279 .359415 .353631 .3479288................................................... .353147 .346763 .340480 .334297 .328212 .322224 .316332 .310535 .304830 .2992189................................................... .310063 .303764 .297579 .291507 .285544 .279690 .273944 .268302 .262764 .25732710.................................................. .272236 .266098 .260084 .254194 .248423 .242771 .237235 .231813 .226502 .22130211.................................................. .239023 .233102 .227314 .221657 .216128 .210725 .205446 .200286 .195245 .19031912.................................................. .209862 .204197 .198672 .193285 .188032 .182910 .177916 .173047 .168301 .16367513.................................................. .184259 .178877 .173640 .168544 .163588 .158766 .154075 .149513 .145076 .14076014.................................................. .161779 .156696 .151761 .146971 .142321 .137809 .133429 .129179 .125055 .12105415.................................................. .142042 .137266 .132639 .128158 .123819 .119618 .115550 .111611 .107798 .10410616.................................................. .124713 .120245 .115927 .111754 .107723 .103828 .100066 .096432 .092922 .08953117.................................................. .109498 .105334 .101320 .097450 .093719 .090123 .086657 .083317 .080098 .07699718.................................................. .096139 .092273 .088554 .084976 .081535 .078227 .075045 .071986 .069045 .06621719.................................................. .084410 .080831 .077396 .074099 .070936 .067901 .064989 .062196 .059517 .05694720.................................................. .074112 .070808 .067644 .064614 .061714 .058938 .056280 .053737 .051303 .048974--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(4.2)--With Interest at 4.2 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

[Applicable after April 30, 1989]--------------------------------------------------------------------------------------------------------------------------------------------------------1 Number of months by which the valuation date for 2 Factors for payout at the end of each period

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .989820 .984755 .981389

1 2 .996577 .986432 .981385 .978030

2 3 .993166 .983056 .978026

3 4 .989767 .979691 .974679

4 5 .986380 .976338

5 6 .983004 .972996

6 7 .979639 .969666

7 8 .976286

8 9 .972945

9 10 .969615

10 11 .966296

11 12 .962989

12 ........................ .959693--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(4.4)--With Interest at 4.4 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .989350 .984054 .980533

1 2 .996418 .985806 .980529 .977021

2 3 .992849 .982275 .977017

3 4 .989293 .978757 .973517

4 5 .985749 .975251

5 6 .982219 .971758

6 7 .978700 .968277

7 8 .975195

8 9 .971702

9 10 .968221

10 11 .964753

11 12 .961298

12 ........................ .957854--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(4.6)--With Interest at 4.6 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .988882 .983354 .979680

1 2 .996259 .985183 .979676 .976015

2 3 .992532 .981498 .976011

3 4 .988820 .977826 .972360

4 5 .985121 .974168

5 6 .981436 .970524

6 7 .977764 .966894

7 8 .974107

8 9 .970463

9 10 .966832

10 11 .963216

11 12 .959613

12 ........................ .956023--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(4.8)--With Interest at 4.8 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .988415 .982657 .978830

1 2 .996101 .984561 .978825 .975013

2 3 .992217 .980722 .975008

3 4 .988348 .976898 .971206

4 5 .984494 .973089

5 6 .980655 .969294

6 7 .976831 .965515

7 8 .973022

8 9 .969228

9 10 .965448

10 11 .961684

11 12 .957934

12 ........................ .954198--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(5.0)--With Interest at 5.0 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .987950 .981961 .977982

1 2 .995942 .983941 .977977 .974014

2 3 .991901 .979949 .974009

3 4 .987877 .975973 .970057

4 5 .983868 .972013

5 6 .979876 .968069

6 7 .975900 .964141

7 8 .971940

8 9 .967997

9 10 .964069

10 11 .960157

11 12 .956261

12 ........................ .952381--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(5.2)--With Interest at 5.2 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .987486 .981268 .977137

1 2 .995784 .983323 .977132 .973018

2 3 .991587 .979178 .973012

3 4 .987407 .975050 .968911

4 5 .983244 .970940

5 6 .979099 .966847

6 7 .974972 .962771

7 8 .970862

8 9 .966769

9 10 .962694

10 11 .958636

11 12 .954594

12 ........................ .950570--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(5.4)--With Interest at 5.4 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .987023 .980577 .976295

1 2 .995627 .982707 .976289 .972026

2 3 .991273 .978409 .972019

3 4 .986938 .974131 .967769

4 5 .982622 .969871

5 6 .978325 .965629

6 7 .974047 .961407

7 8 .969787

8 9 .965546

9 10 .961323

10 11 .957119

11 12 .952934

12 ........................ .948767--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(5.6)--With Interest at 5.6 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .986562 .979888 .975455

1 2 .995470 .982092 .975449 .971036

2 3 .990960 .977643 .971029

3 4 .986470 .973214 .966630

4 5 .982001 .968805

5 6 .977552 .964416

6 7 .973124 .960047

7 8 .968715

8 9 .964326

9 10 .959958

10 11 .955609

11 12 .951279

12 ........................ .946970--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(5.8)--With Interest at 5.8 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .986102 .979201 .974618

1 2 .995313 .981480 .974611 .970050

2 3 .990647 .976879 .970043

3 4 .986004 .972300 .965496

4 5 .981382 .967743

5 6 .976782 .963206

6 7 .972203 .958692

7 8 .967646

8 9 .963111

9 10 .958596

10 11 .954103

11 12 .949631

12 ........................ .945180--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(6.0)--With Interest at 6.0 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .985643 .978516 .973784

1 2 .995156 .980869 .973776 .969067

2 3 .990336 .976117 .969059

3 4 .985538 .971389 .964365

4 5 .980764 .966684

5 6 .976014 .962001

6 7 .971286 .957341

7 8 .966581

8 9 .961899

9 10 .957239

10 11 .952603

11 12 .947988

12 ........................ .943396--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(6.2)--With Interest at 6.2 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .985185 .977833 .972952

1 2 .995000 .980259 .972944 .968087

2 3 .990024 .975358 .968079

3 4 .985074 .970481 .963238

4 5 .980148 .965628

5 6 .975247 .960799

6 7 .970371 .955995

7 8 .965519

8 9 .960691

9 10 .955887

10 11 .951107

11 12 .946352

12 ........................ .941620--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(6.4)--With Interest at 6.4 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .984729 .977152 .972122

1 2 .994844 .979652 .972114 .967110

2 3 .989714 .974600 .967101

3 4 .984611 .969575 .962115

4 5 .979534 .964576

5 6 .974483 .959602

6 7 .969458 .954654

7 8 .964460

8 9 .959487

9 10 .954539

10 11 .949617

11 12 .944721

12 ........................ .939850--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(6.6)--With Interest at 6.6 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .984274 .976473 .971295

1 2 .994688 .979046 .971286 .966136

2 3 .989404 .973845 .966127

3 4 .984149 .968672 .960995

4 5 .978921 .963527

5 6 .973721 .958408

6 7 .968549 .953317

7 8 .963404

8 9 .958286

9 10 .953196

10 11 .948132

11 12 .943096

12 ........................ .938086--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(6.8)--With Interest at 6.8 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .983821 .975796 .970471

1 2 .994533 .978442 .970461 .965165

2 3 .989095 .973092 .965156

3 4 .983688 .967772 .959879

4 5 .978309 .962481

5 6 .972961 .957219

6 7 .967641 .951985

7 8 .962351

8 9 .957089

9 10 .951857

10 11 .946653

11 12 .941477

12 ........................ .936330--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(7.0)--With Interest at 7.0 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .983368 .975122 .969649

1 2 .994378 .977839 .969639 .964198

2 3 .988787 .972342 .964187

3 4 .983228 .966875 .958766

4 5 .977700 .961439

5 6 .972203 .956033

6 7 .966736 .950658

7 8 .961301

8 9 .955896

9 10 .950522

10 11 .945178

11 12 .939864

12 ........................ .934579--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(7.2)--With Interest at 7.2 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .982917 .974449 .968830

1 2 .994223 .977239 .968819 .963233

2 3 .988479 .971593 .963222

3 4 .982769 .965980 .957658

4 5 .977091 .960400

5 6 .971446 .954851

6 7 .965834 .949335

7 8 .960255

8 9 .954707

9 10 .949192

10 11 .943708

11 12 .938256

12 ........................ .932836--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(7.4)--With Interest at 7.4 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .982467 .973778 .968013

1 2 .994068 .976640 .968002 .962271

2 3 .988172 .970847 .962260

3 4 .982311 .965088 .956552

4 5 .976484 .959364

5 6 .970692 .953673

6 7 .964935 .948017

7 8 .959211

8 9 .953521

9 10 .947866

10 11 .942243

11 12 .936654

12 ........................ .931099--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(7.6)--With Interest at 7.6 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .982019 .973109 .967199

1 2 .993914 .976042 .967187 .961313

2 3 .987866 .970103 .961301

3 4 .981854 .964199 .955451

4 5 .975879 .958331

5 6 .969940 .952499

6 7 .964037 .946703

7 8 .958171

8 9 .952340

9 10 .946544

10 11 .940784

11 12 .935058

12 ........................ .929368--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(7.8)--With Interest at 7.8 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.0000000 .981571 .972442 .966387

1 2 .993761 .975447 .966374 .960357

2 3 .987560 .969361 .960345

3 4 .981398 .963312 .954353

4 5 .975275 .957302

5 6 .969190 .951329

6 7 .963143 .945393

7 8 .957133

8 9 .951161

9 10 .945227

10 11 .939329

11 12 .933468

12 ........................ .927644--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(8.0)--With Interest at 8.0 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .981125 .971777 .965578

1 2 .993607 .974853 .965564 .959405

2 3 .987255 .968621 .959392

3 4 980944 .962429 .953258

4 5 .974673 .956276

5 6 .968442 .950162

6 7 .962250 .944088

7 8 .956099

8 9 .949987

9 10 .943913

10 11 .937879

11 12 .931883

12 ........................ .925926--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(8.2)--With Interest at 8.2 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .980680 .971114 .964771

1 2 .993454 .974261 .964757 .958455

2 3 .986951 .967883 .958441

3 4 .980490 .961547 .952167

4 5 .974072 .955253

5 6 .967695 .949000

6 7 .961361 .942788

7 8 .955068

8 9 .948816

9 10 .942605

10 11 .936434

11 12 .930304

12 ........................ .924214--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(8.2)--With Interest at 8.2 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .980237 .970453 .963966

1 2 .993301 .973670 .963952 .957509

2 3 .986647 .967148 .957494

3 4 .980037 .960669 .951080

4 5 .973472 .954233

5 6 .966951 .947841

6 7 .960473 .941491

7 8 .954039

8 9 .947648

9 10 .941300

10 11 .934994

11 12 .928731

12 ........................ .922509--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(8.6)--With Interest at 8.6 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .979794 .969794 .963164

1 2 .993148 .973081 .963149 .956565

2 3 .986344 .966414 .956550

3 4 .979586 .959793 .949996

4 5 .972874 .953217

5 6 .966209 .946686

6 7 .959589 .940199

7 8 .953014

8 9 .946484

9 10 .940000

10 11 .933559

11 12 .927163

12 ........................ .920810--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(8.8)--With Interest at 8.8 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .979353 .969136 .962364

1 2 .992996 .972494 .962349 .955624

2 3 .986041 .965683 .955609

3 4 .979135 .958919 .948916

4 5 .972278 .952203

5 6 .965468 .945534

6 7 .958706 .938912

7 8 .951992

8 9 .945324

9 10 .938703

10 11 .932129

11 12 .925600

12 ........................ .919118--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(9.0)--With Interest at 9.0 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .978913 .968481 .961567

1 2 .992844 .971908 .961551 .954686

2 3 .985740 .964954 .954670

3 4 .978686 .958049 .947839

4 5 .971683 .951193

5 6 .964730 .944387

6 7 .957826 .937629

7 8 .950972

8 9 .944167

9 10 .937411

10 11 .930703

11 12 .924043

12 ........................ .917431--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(9.2)--With Interest at 9.2 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .978474 .967827 .960772

1 2 .992693 .971324 .960755 .953752

2 3 .985439 .964226 .953734

3 4 .978238 .957180 .946765

4 5 .971089 .950186

5 6 .963993 .943242

6 7 .956949 .936350

7 8 .949956

8 9 .943014

9 10 .936123

10 11 .929283

11 12 .922492

12 ........................ .915751--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(9.4)--With Interest at 9.4 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .978037 .967176 .959980

1 2 .992541 .970742 .959962 .952820

2 3 .985138 .963501 .952802

3 4 .977790 .956315 .945695

4 5 .970497 .949182

5 6 .963258 .942102

6 7 .956074 .935075

7 8 .948942

8 9 .941865

9 10 .934839

10 11 .927867

11 12 .920946

12 ........................ .914077--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(9.6)--With Interest at 9.6 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .977600 .966526 .959190

1 2 .992390 .970161 .959171 .951890

2 3 .984838 .962778 .951872

3 4 .977344 .955452 .944628

4 5 .969906 .948181

5 6 .962526 .940965

6 7 .955201 .933805

7 8 .947932

8 9 .940718

9 10 .933560

10 11 .926455

11 12 .919405

12 ........................ .912409--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(9.8)--With Interest at 9.8 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .977165 .965878 .958402

1 2 .992239 .969582 .958382 .950964

2 3 .984539 .962057 .950945

3 4 .976898 .954591 .943565

4 5 .969317 .947183

5 6 .961795 .939832

6 7 .954331 .932539

7 8 .946924

8 9 .939576

9 10 .932284

10 11 .925049

11 12 .917870

12 ........................ .910747--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(10.0)--With Interest at 10.0 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .976731 .965232 .957616

1 2 .992089 .969004 .957596 .950041

2 3 .984240 .961338 .950021

3 4 .976454 .953733 .942505

4 5 .968729 .946188

5 6 .961066 .938703

6 7 .953463 .931277

7 8 .945920

8 9 .938436

9 10 .931012

10 11 .923647

11 12 .916340

12 ........................ .909091--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(10.2)--With Interest at 10.2 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .976298 .964588 .956833

1 2 .991939 .968428 .956812 .949120

2 3 .983943 .960622 .949099

3 4 .976011 .952878 .941448

4 5 .968143 .945196

5 6 .960338 .937577

6 7 .952597 .930019

7 8 .944918

8 9 .937301

9 10 .929745

10 11 .922250

11 12 .914816

12 ........................ .907441--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(10.4)--With Interest at 10.4 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .975867 .963946 .956052

1 2 .991789 .967854 .956031 .948202

2 3 .983645 .959907 .948181

3 4 .975568 .952025 .940395

4 5 .967558 .944208

5 6 .959613 .936455

6 7 .951734 .928765

7 8 .943919

8 9 .936168

9 10 .928481

10 11 .920858

11 12 .913296

12 ........................ .905797--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(10.6)--With Interest at 10.6 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .975436 .963305 .955274

1 2 .991639 .967281 .955252 .947287

2 3 .983349 .959194 .947265

3 4 .975127 .951174 .939345

4 5 .966974 .943222

5 6 .958890 .935336

6 7 .950873 .927516

7 8 .942923

8 9 .935039

9 10 .927222

10 11 .919470

11 12 .911782

12 ........................ .904159--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(10.8)--With Interest at 10.8 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .975007 .962667 .954498

1 2 .991490 .966710 .954475 .946375

2 3 .983052 .958483 .946352

3 4 .974687 .950327 .938299

4 5 .966392 .942239

5 6 .958168 .934221

6 7 .950014 .926271

7 8 .941930

8 9 .933914

9 10 .925966

10 11 .918086

11 12 .910273

12 ........................ .902527--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(11.0)--With Interest at 11.0 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .974579 .962030 .953724

1 2 .991341 .966140 .953700 .945466

2 3 .982757 .957774 .945442

3 4 .974247 .949481 .937255

4 5 .965811 .941260

5 6 .957449 .933109

6 7 .949158 .925029

7 8 .940939

8 9 .932792

9 10 .924715

10 11 .916708

11 12 .908770

12 ........................ .900901--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(11.2)--With Interest at 11.2 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .974152 .961395 .952952

1 2 .991192 .965572 .952927 .944559

2 3 .982462 .957068 .944534

3 4 .973809 .948638 .936215

4 5 .965232 .940283

5 6 .956731 .932001

6 7 .948304 .923792

7 8 .939952

8 9 .931673

9 10 .923467

10 11 .915333

11 12 .907272

12 ........................ .899281--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(11.4)--With Interest at 11.4 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .973726 .960762 .952183

1 2 .991044 .965005 .952157 .943655

2 3 .982168 .956363 .943630

3 4 .973372 .947798 .935178

4 5 .964654 .939309

5 6 .956015 .930896

6 7 .947452 .922559

7 8 .938967

8 9 .930557

9 10 .922223

10 11 .913964

11 12 .905778

12 ........................ .897666--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(11.6)--With Interest at 11.6 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .973302 .960130 .951416

1 2 .990896 .964440 .951389 .942754

2 3 .981874 .955660 .942728

3 4 .972935 .946959 .934145

4 5 .964077 .938338

5 6 .955300 .929795

6 7 .946603 .921330

7 8 .937985

8 9 .929445

9 10 .920984

10 11 .912599

11 12 .904290

12 ........................ .896057--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(11.8)--With Interest at 11.8 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .972878 .959501 .950651

1 2 .990748 .963877 .950624 .941855

2 3 .981582 .954959 .941828

3 4 .972500 .946124 .933114

4 5 .963502 .937370

5 6 .954588 .928698

6 7 .945756 .920105

7 8 .937006

8 9 .928337

9 10 .919748

10 11 .911238

11 12 .902807

12 ........................ .894454--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(12.0)--With Interest at 12.0 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .972456 .958873 .949888

1 2 .990600 .963315 .949860 .940960

2 3 .981289 .954260 .940932

3 4 .972065 .945290 .932087

4 5 .962928 .936405

5 6 .953877 .927603

6 7 .944911 .918884

7 8 .936029

8 9 .927231

9 10 .918515

10 11 .909882

11 12 .901329

12 ........................ .892857--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(12.2)--With Interest at 12.2 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .972034 .958247 .949128

1 2 .990453 .962754 .949099 .940067

2 3 .980997 .953563 .940038

3 4 .971632 .944460 .931063

4 5 .962356 .935443

5 6 .953168 .926512

6 7 .944069 .917667

7 8 .935056

8 9 .926129

9 10 .917287

10 11 .908530

11 12 .899856

12 ........................ .891266--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(12.4)--With Interest at 12.4 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .971614 .957623 .948370

1 2 .990306 .962195 .948340 .939176

2 3 .980706 .952868 .939147

3 4 .971199 .943631 .930043

4 5 .961785 .934484

5 6 .952461 .925425

6 7 .943228 .916454

7 8 .934085

8 9 .925030

9 10 .916063

10 11 .907183

11 12 .898389

12 ........................ .889680--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(12.6)--With Interest at 12.4 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least but less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .971195 .957000 .947614

1 2 .990159 .961638 .947583 .938289

2 3 .980416 .952175 .938258

3 4 .970768 .942805 .929025

4 5 .961215 .933527

5 6 .951756 .924341

6 7 .942390 .915245

7 8 .933117

8 9 .923934

9 10 .914842

10 11 .905840

11 12 .896926

12 ........................ .888099--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(12.8)--With Interest at 12.8 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least but less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .970777 .956379 .946860

1 2 .990013 .961082 .946828 .937403

2 3 .980126 .951484 .937372

3 4 .970337 .941981 .928011

4 5 .960647 .932574

5 6 .951053 .923260

6 7 .941554 .914040

7 8 .932151

8 9 .922842

9 10 .913625

10 11 .904501

11 12 .895468

12 ........................ .886525--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(13.0)--With Interest at 13.0 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .970360 .955760 .946108

1 2 .989867 .960528 .946075 .936521

2 3 .979836 .950795 .936489

3 4 .969908 .941160 .926999

4 5 .960079 .931623

5 6 .950351 .922183

6 7 .940721 .912838

7 8 .931188

8 9 .921753

9 10 .912412

10 11 .903167

11 12 .894015

12 ........................ .884956--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(13.2)--With Interest at 13.2 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .969945 .955143 .945359

1 2 .989721 .959975 .945325 .935641

2 3 .979548 .950107 .935608

3 4 .969479 .940341 .925991

4 5 .959514 .930675

5 6 .949651 .921109

6 7 .939889 .911641

7 8 .930228

8 9 .920667

9 10 .911203

10 11 .901837

11 12 .892567

12 ........................ .883392--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(13.4)--With Interest at 13.4 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .969530 .954527 .944611

1 2 .989575 .959423 .944577 .934764

2 3 .979260 .949422 .934730

3 4 .969051 .939524 .924986

4 5 .958949 .929730

5 6 .948953 .920038

6 7 .939060 .910447

7 8 .929271

8 9 .919584

9 10 .909998

10 11 .900511

11 12 .891124

12 ........................ .881834--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(13.6)--With Interest at 13.6 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .969117 .953913 .943866

1 2 .989430 .958873 .943831 .933890

2 3 .978972 .948738 .933854

3 4 .968624 .938710 .923984

4 5 .958386 .928788

5 6 .948256 .918971

6 7 .938233 .909257

7 8 .928316

8 9 .918504

9 10 .908796

10 11 .899190

11 12 .889686

12 ........................ .880282--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(13.8)--With Interest at 13.8 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .968704 .953301 .943123

1 2 .989285 .958325 .943087 .933018

2 3 .978685 .948056 .932982

3 4 .968199 .937898 .922985

4 5 .957824 .927849

5 6 .947561 .917907

6 7 .937408 .908072

7 8 .927364

8 9 .917428

9 10 .907598

10 11 .897873

11 12 .888252

12 ........................ .878735--------------------------------------------------------------------------------------------------------------------------------------------------------

Table F(14.0)--With Interest at 14.0 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations

the first rull taxable year of the trust precedes -----------------------------------------------------------------------------------------------------

the first payout--------------------------------------------------- Annual period Semiannual period Quarterly period Monthly period

At least But less than--------------------------------------------------------------------------------------------------------------------------------------------------------

1 1.000000 .968293 .952691 .942382

1 2 .989140 .957778 .942345 .932148

2 3 .978399 .947377 .932111

3 4 .967774 .937088 .921989

4 5 .957264 .926912

5 6 .946868 .916846

6 7 .936586 .906889

7 8 .926415

8 9 .916354

9 10 .906403

10 11 .896560

11 12 .886824

12 ........................ .877193--------------------------------------------------------------------------------------------------------------------------------------------------------

(7) Actuarial Table U(1) for transfers for which the valuation date is on or after May 1, 2009. For transfers for which the valuation date is on or after May 1, 2009, the present value of a charitable remainder unitrust interest that is dependent on the termination of a life interest is determined by using the section 7520 rate, Table U(1) in this paragraph (e)(7) and Table F(4.2) through (14.0) in paragraph (e)(6) of this section. See, however, Sec. 1.7520-3(b) (relating to exceptions to the use of prescribed tables under certain circumstances). Many actuarial factors not contained in the following tables are contained in Internal Revenue Service Publication 1458, ``Actuarial Valuations Version 3B'' (2009). This publication is available, at no charge, electronically via the IRS Internet site at http://www.irs.gov. [GRAPHIC] [TIFF OMITTED] TR10AU11.024 [GRAPHIC] [TIFF OMITTED] TR10AU11.025 [GRAPHIC] [TIFF OMITTED] TR10AU11.026 [GRAPHIC] [TIFF OMITTED] TR10AU11.027 [GRAPHIC] [TIFF OMITTED] TR10AU11.028 [GRAPHIC] [TIFF OMITTED] TR10AU11.029 [GRAPHIC] [TIFF OMITTED] TR10AU11.030 [GRAPHIC] [TIFF OMITTED] TR10AU11.031 [GRAPHIC] [TIFF OMITTED] TR10AU11.032 [GRAPHIC] [TIFF OMITTED] TR10AU11.033 [GRAPHIC] [TIFF OMITTED] TR10AU11.034 [GRAPHIC] [TIFF OMITTED] TR10AU11.035 [GRAPHIC] [TIFF OMITTED] TR10AU11.036 [GRAPHIC] [TIFF OMITTED] TR10AU11.037 [GRAPHIC] [TIFF OMITTED] TR10AU11.038

(f) Effective/applicability date. This section applies on and after May 1, 2009. [T.D. 8540, 59 FR 30117, June 10, 1994, as amended by T.D. 8819, 64 FR 23199, Apr. 30, 1999; T.D. 8886, 65 FR 36919, 36943, June 12, 2000; T.D. 9448, 74 FR 21465, May 7, 2009; T.D. 9540, 76 FR 49595, Aug. 10, 2011] treatment of excess distributions of trusts applicable to taxable years

beginning before january 1, 1969 Sec. 1.665(a)-0 Excess distributions by trusts; scope of subpart D.

Subpart D (section 665 and following), part I, subchapter J, chapter 1 of the Internal Revenue Code, in the case of trusts other than foreign trusts created by U.S. persons, is designed generally to prevent a shift of tax burden to a trust from a beneficiary or beneficiaries. In the case of a foreign trust created by a U.S. person, subpart D is designed to prevent certain other tax avoidance possibilities. To accomplish these ends, subpart D provides special rules for treatment of amounts paid, credited, or required to be distributed by a complex trust (subject to subpart C (section 661 and following) of such part I) in any year in excess of distributable net income for that year. Such an excess distribution is defined as an accumulation distribution, subject to the limitations in section 665 (b) or (c). An accumulation distribution, in the case of a trust other than a foreign trust created by a U.S. person, is ``thrown back'' to each of the 5 preceding years in inverse order. In the case of a foreign trust created by a U.S. person such an accumulation distribution is ``thrown back,'' in inverse order, to each of the preceding years to which the Internal Revenue Code of 1954 applies. That is, an accumulation distribution will be taxed to the beneficiaries of the trust in the year the distribution is made or required, but, in general, only to the extent of the distributable net income of those years which was not in fact distributed. However, with respect to a distribution by a trust other than a foreign trust created by a U.S. person, the resulting tax will not be greater than the aggregate of the taxes that would have been attributable to the amount thrown back to previous years had they been included in gross income of the beneficiaries in those years. In the case of a foreign trust created by a U.S. person, the resulting tax is computed under the provisions of section 669. To prevent double taxation, both in the case of a foreign trust created by a U.S. person, and a trust other than a foreign trust created by a U.S. person, the beneficiaries receive a credit for any taxes previously paid by the trust which are attributable to the excess thrown back and which are creditable under the provisions of chapter 1 of the Internal Revenue Code. Subpart D does not apply to any estate. [T.D. 6989, 34 FR 733, Jan. 17, 1969] Sec. 1.665(a)-1 Undistributed net income.

(a) The term undistributed net income means for any taxable year the distributable net income of the trust for that year as determined under section 643(a), less:

(1) The amount of income required to be distributed currently and any other amounts properly paid or credited or required to be distributed to beneficiaries in the taxable year as specified in paragraphs (1) and (2) of section 661(a), and

(2) The amount of taxes imposed on the trust, as defined in Sec. 1.665(d)-1.

The application of the rule in this paragraph to the first year of a trust in which income is accumulated may be illustrated by the following example:

Example. Assume that under the terms of the trust, $10,000 of income is required to be distributed currently to A and the trustee has discretion to make additional distributions to A. During the taxable year 1954 the trust had distributable net income of $30,100 derived from royalties and the trustee made distributions of $20,000 to A. The taxable income of the trust is $10,000 on which a tax of $2,640 is paid. The undistributed net income of the trust as of the close of the taxable year 1954 is $7,460 computed as follows: Distributable net income..................................... $30,100Less:

Income currently distributable to A............. $10,000

Other amounts distributed to A.................. 10,000

Taxes imposed on the trust (see Sec. 1.665(d)- 2,640

1).............................................

-----------

22,640

------------

Undistributed net income................................. 7,460

See also paragraphs (e)(1) and (f)(1) of Sec. 1.668(b)-2 for additional illustrations of the application of the rule in this paragraph to the first year of a trust in which income is accumulated.

(b) The undistributed net income of a foreign trust created by a U.S. person for any taxable year is the distributable net income of such trust (see Sec. 1.643(a)-6 and the examples set forth in paragraph (b) thereof), less:

(2) The amount of taxes imposed on such trust by chapter 1 of the Internal Revenue Code, which are attributable to items of income which are required to be included in such distributable net income. For purposes of subparagraph (2) of this paragraph, the amount of taxes imposed on the trust (for any taxable year), by chapter 1 of the Internal Revenue Code is the amount of taxes imposed pursuant to the provisions of section 871 which is properly allocable to the undistributed portion of the distributable net income. See Sec. 1.665(d)-1. The amount of taxes imposed pursuant to the provisions of section 871 is the difference between the total tax imposed pursuant to the provisions of that section on the foreign trust created by a U.S. person for the year and the amount which would have been imposed on such trust had all the distributable net income, as determined under section 643(a), been distributed. The application of the rule in this paragraph may be illustrated by the following examples:

Example 1. A trust was created in 1952 under the laws of Country X by the transfer to a trustee in Country X of money or property by a U.S. person. The entire trust constitutes a foreign trust created by a U.S. person. The governing instrument of the trust provides that $7,000 of income is required to be distributed currently to a U.S. beneficiary and gives the trustee discretion to make additional distributions to the beneficiary. During the taxable year 1963 the trust had income of $10,000 from dividends of a U.S. corporation (on which Federal income taxes of $3,000 were imposed pursuant to the provisions of section 871 and withheld under section 1441 resulting in the receipt by the trust of cash in the amount of $7,000), $20,000 in capital gains from the sale of stock of a Country Y corporation, and $30,000 from dividends of a Country X corporation, none of the gross income of which was derived from sources within the United States. The trustee did not file a U.S. income tax return for the taxable year 1963. The distributable net income of the trust before distributions to the beneficiary for 1963 is $60,000 ($57,000 of which is cash). During 1963 the trustee made distributions to the U.S. beneficiary equaling one-half of the trust's distributable net income or $30,000. Thus, the U.S. beneficiary is treated as having had distributed to him $5,000 (composed of $3,500 as a cash distribution and $1,500 as the tax imposed pursuant to the provisions of section 871 and withheld under section 1441), representing one-half of the income from U.S. sources; $10,000 in cash, representing one-half of the capital gains from the sale of stock of the Country Y corporation; and $15,000 in cash, representing one-half of the income from Country X sources for a total of $30,000. The undistributed net income of the trust at the close of taxable year 1963 is $28,500 computed as follows: Distributable net income..................................... $60,000Less:

(1) Amounts distributed to the beneficiary--....

Income currently distributed to the beneficiary. $7,000

Other amounts distributed to the beneficiary.... 21,500

Taxes under sec. 871 deemed distributed to the 1,500

beneficiary....................................

-----------

Total amounts distributed to the beneficiary.. 30,000

(2) Amount of taxes imposed on the trust under 1,500

chapter 1 of the Code (See Sec. 1.665(d)-1)..

-----------

Total.................................................... 31,500

------------

Undistributed net income................................. 28,500

Example 2. The facts are the same as in example 1 except that property has been transferred to the trust by a person other than a U.S. person, and during 1963 the foreign trust created by a U.S. person was 60 percent of the entire foreign trust. The trustee paid no income taxes to Country X in 1963.

(1) The undistributed net income of the foreign trust created by a U.S. person for 1963 is $17,100, computed as follows: Distributable net income (60% of each item of gross income of

entire trust):

60% of $10,000 U.S. dividends.............................. $6,000

60% of $20,000 Country X capital gains..................... 12,000

60% of $30,000 Country X dividends......................... 18,000

------------

Total.................................................... 36,000

Less:

(i) Amounts distributed to the beneficiary--

Income currently distributed to the beneficiary $4,200

(60% of $7,000)................................

Other amounts distributed to the beneficiary 12,900

(60% of $21,500)...............................

Taxes under sec. 871 deemed distributed to the 900

beneficiary (60% of $1,500)....................

-----------

Total amounts distributed to the beneficiary.. 18,000

(ii) Amount of taxes imposed on the trust under $900

chapter 1 of the Code (See Sec. 1.665(d)-1)

(60% of $1,500)................................

----------

Total.................................................... $18,900

------------

Undistributed net income................................. 17,100

(2) The undistributed net income of the portion of the entire trust which is not a foreign trust created by a U.S. person for 1963 is $11,400, computed as follows: Distributed net income (40% of each item of gross income of

entire trust)

40% of $10,000 U.S. dividends.............................. $4,000

40% of $20,000 Country X capital gains..................... 8,000

40% of Country X dividends................................. 12,000

------------

Total.................................................... 24,000Less:

(i) Amounts distributed to the beneficiary--

Income currently distributed to the beneficiary $2,800

(40% of $7,000)................................

Other amounts distributed to the beneficiary 8,600

(40% of $21,500)...............................

Taxes under sec. 871 deemed distributed to the 600

beneficiary (40% of $1,500)....................

-----------

Total amounts distributed to the beneficiary.. 12,000

(ii) Amount of taxes imposed on the trust under $600

chapter 1 of the Code (See Sec. 1.665(d)-1)

(40% of $1,500)................................

-----------

Total.................................................... $12,600

------------

Undistributed net income................................. 11,400

(c) However, the undistributed net income for any year to which an accumulation distribution for a later year may be thrown back may be reduced by accumulation distributions in intervening years and also by any taxes imposed on the trust which are deemed to be distributed under section 666 by reason of the accumulation distributions. On the other hand, undistributed net income for any year will not be reduced by any distributions in an intervening year which are excluded from the definition of an accumulation distribution under section 665(b), or which are excluded under section 663(a)(1), relating to gifts, bequests, etc. See paragraph (f)(5) of Sec. 1.668(b)-2 for an illustration of the reduction of undistributed net income for any year by a subsequent accumulation distribution. [T.D. 6989, 34 FR 733, 741, Jan. 17, 1969] Sec. 1.665(b)-1 Accumulation distributions of trusts other thancertain foreign trusts; in general.

(a) Subject to the limitations set forth in Sec. 1.665(b)-2, in the case of a trust other than a foreign trust created by a U.S. person, the term accumulation distribution for any taxable year means an amount (if in excess of $2,000), by which the amounts properly paid, credited, or required to be distributed within the meaning of section 661(a)(2) for that year exceed the distributable net income (determined under section 643(a)) of the trust, reduced (but not below zero) by the amount of income required to be distributed currently. (In computing the amount of an accumulation distribution pursuant to the preceding sentence, there is taken into account amounts applied or distributed for the support of a dependent under the circumstances specified in section 677(b) or section 678(c) out of corpus or out of other than income for the taxable year and amounts used to discharge or satisfy any person's legal obligation as that term is used in Sec. 1.662(a)-4.) If the distribution as so computed is $2,000 or less, it is not an accumulation distribution within the meaning of subpart D (section 665 and following), part I, subchapter J, chapter 1 of the Code. If the distribution exceeds $2,000, then the full amount is an accumulation distribution for the purposes of subpart D.

(b) Although amounts properly paid, credited, or required to be distributed under section 661(a)(2) do not exceed the income of the trust during the taxable year, an accumulation distribution may result if such amounts exceed distributable net income reduced (but not below zero) by the amount required to be distributed currently. This may result from the fact that expenses allocable to corpus are taken into account in determining taxable income and hence distributable net income. However, in the case of a trust other than a foreign trust created by a U.S. person, the provisions of subpart D will not apply unless there is undistributed net income in at least one of the five preceding taxable years. See section 666 and the regulations thereunder.

(c) The provisions of paragraphs (a) and (b) of this section may be illustrated by the following examples (it is assumed in each case that the exclusions provided in Sec. 1.665(b)-2 do not apply):

Example 1. A trustee properly makes a distribution to a beneficiary of $20,000 during the taxable year 1956, of which $10,000 is income required to be distributed currently to the beneficiary. The distributable net income of the trust is $15,000. There is an accumulation distribution of $5,000 computed as follows: Total distribution........................................... $20,000Less: Income required to be distributed currently (section 10,000

661(a)(1))..................................................

------------

Other amounts distributed (section 661(a)(2))............ 10,000Distributable net income.......................... $15,000Less: Income required to be distributed currently. 10,000

-----------Balance of distributable net income.......................... 5,000

------------

Accumulation distribution................................ 5,000

Example 2. Under the terms of the trust instrument, an annuity of $15,000 is required to be paid to A out of income each year and the trustee may in his discretion make distributions out of income or corpus to B. During the taxable year the trust had income of $18,000, as defined in section 643(b), and expenses allocable to corpus of $5,000. Distributable net income amounted to $13,000. The trustee distributed $15,000 of income to A and in the exercise of his discretion, paid $5,000 to B. There is an accumulation distribution of $5,000 computed as follows: Total distribution........................................... $20,000Less: Income required to be distributed currently to A 15,000

(section 661(a)(1)).........................................

------------

Other amounts distributed (section 661(a)(2))............ 5,000Distributable net income.......................... $13,000Less: Income required to be distributed currently 15,000

to A.............................................

-----------Balance of distributable net income.......................... 0

------------

Accumulation distribution to B........................... 5,000

Example 3. Under the terms of a trust instrument, the trustee may either accumulate the trust income or make distributions to A and B. The trustee may also invade corpus for the benefit of A and B. During the taxable year, the trust had income as defined in section 643(b) of $22,000 and expenses of $5,000 allocable to corpus. Distributable net income amounts to $17,000. The trustee distributed $10,000 each to A and B during the taxable year. There is an accumulation distribution of $3,000 computed as follows: Total distribution........................................... $20,000Less: income required to be distributed currently............ 0

------------

Other amounts distributed (section 661(a)(2))............ 20,000Distributable net income..................................... 17,000

------------

Accumulation distribution................................ 3,000

(d) There are not taken into account, in computing the accumulation distribution for any taxable year, any amounts deemed distributed in that year because of an accumulation distribution in a later year. [T.D. 6500, 25 FR 11814, Nov. 26, 1960, as amended by T.D. 6989, 34 FR 734, Jan. 17, 1969] Sec. 1.665(b)-2 Exclusions from accumulation distributions in thecase of trusts (other than a foreign trust created by a U.S. person).

(a) In the case of a trust other than a foreign trust created by a U.S. person, certain amounts paid, credited, or required to be distributed to a beneficiary are excluded under section 665(b) in determining whether there is an accumulation distribution for the purposes of subpart D (section 665 and following), part I, subchapter J, chapter 1 of the Code. These exclusions are solely for the purpose of determining the amount allocable to preceding years under section 666 and in no way affect the determination under subpart C (section 661 and following) of such part I of the beneficiary's tax liability for the year of distribution. Further, amounts excluded from accumulation distributions do not reduce the amount of undistributed net income for the 5 years preceding the year of distribution.

(b) The amounts excluded from the computation of an accumulation distribution are discussed in the following subparagraphs:

(1) Distributions from accumulations while a beneficiary is under 21. (i) The first exception to the definition of an accumulation distribution is for amounts paid, credited, or required to be distributed to a beneficiary who was under 21 years of age or unborn when it was accumulated. A distribution is to be considered as so paid, credited, or required to be distributed to the extent, and only to the extent, that there is no undistributed net income for taxable years preceding the year of distribution other than undistributed net income accumulated while the beneficiary was under 21. If a distribution can be made from income accumulated either before or after a beneficiary reaches 21, it will be considered as made from the most recently accumulated income, and it will be so considered even though the governing instrument directs that distributions be charged first against the earliest accumulations.

(i) The first exception to the definition of an accumulation distribution is for amounts paid, credited, or required to be distributed to a beneficiary who was under 21 years of age or unborn when it was accumulated. A distribution is to be considered as so paid, credited, or required to be distributed to the extent, and only to the extent, that there is no undistributed net income for taxable years preceding the year of distribution other than undistributed net income accumulated while the beneficiary was under 21. If a distribution can be made from income accumulated either before or after a beneficiary reaches 21, it will be considered as made from the most recently accumulated income, and it will be so considered even though the governing instrument directs that distributions be charged first against the earliest accumulations.

(ii) As was indicated in paragraph (a) of this section, a distribution of an amount excepted from the definition of an accumulation distribution will not reduce undistributed net income for the purpose of determining the effect of a future accumulation distribution. Thus, a distribution to a beneficiary of income accumulated before he reached 21 would not reduce the undistributed net income includible in a future accumulation distribution to another beneficiary. However, all future distributions to the same beneficiary, or to another beneficiary to whom a distribution would be excepted under the provisions of this subparagraph, would be excepted from the definition of an accumulation distribution to the extent that they could not be paid, credited, or required to be distributed from other accumulated income.

(iii) The following examples illustrate the application of the foregoing rules of this subparagraph (in each of these examples it is assumed that the exceptions in section 665(b) (2), (3), and (4) do not apply):

(a) Income is to be accumulated until A reaches 21 when the corpus and accumulated income are to be distributed to him. The distribution is not an accumulation distribution.

(b) Income is to be accumulated until A is 21, when it is to be distributed to him but the corpus is to remain in trust. A distribution of the accumulated income to A when he reaches 21 is not an accumulation distribution.

(c) Income is to be accumulated and added to corpus until A reaches 21, when he is to receive one-third of the corpus (including accumulations). Thereafter all the income is to be paid to A until he is 23 when the remaining corpus (including accumulations) is to be paid to him. If A dies under that age any undistributed portion is to be paid to B. Distributions to A at 21 and 23 out of accumulations are not accumulation distributions even though they include accumulated income. However, if A died at the age of 22, when B was 23, a distribution to B would be an accumulation distribution to the extent of income accumulations since B reached 21, and the amount of undistributed net income includible in the distribution will not be reduced by the previous distribution to A.

(d) Income is to be accumulated and added to corpus until A is 21. After he is 21, he is entitled to all the income and, in addition, to distributions of corpus in the discretion of the trustee. When he reaches 25 he is entitled to the corpus. Distributions to A are not accumulation distributions, whether they are discretionary or upon termination of the trust.

(e) The facts are the same as in the preceding example, except that income is to be accumulated until A is 23. Distributions to A are accumulation distributions to the extent of income accumulated after A reached 21.

(f) Income may be distributed among a testator's children or accumulated and added to corpus until the youngest child is 21, when the corpus is to be distributed to the testator's then living descendants. Upon termination of the trust, the corpus is distributed to A, age 21; B, age 23; and C, the child of a deceased child, age 3. The distributions to A and C are not accumulation distributions. The distribution to B is an accumulation distribution to the extent of income accumulated after he reaches 21. (If the terms of the trust were such that it was subject to the separate share treatment under section 663(c), the distribution to B would be an accumulation distribution only to the extent of income accumulated for B's separate share since he reached 21.)

(g) Income may be distributed to A or accumulated and added to corpus during A's life. Upon the death of A the corpus is to be distributed to B. B is 23 at A's death. The distribution is an accumulation distribution to the extent of income accumulated since B reached 21.

(2) Emergency distributions. The second exclusion from the definition of an accumulation distribution is for amounts properly paid or credited to a beneficiary to meet his emergency needs. Whether or not a distribution falls within this exclusion depends upon the facts and circumstances causing the distribution. A distribution based upon an unforeseen or unforeseeable combination of circumstances requiring immediate help to the beneficiary would qualify for the exclusion. However, the beneficiary must be in actual need of the distribution and the fact that he had other sufficient resources would tend to negate the conclusion that a distribution was to meet his emergency needs. Ordinary distributions for the support, maintenance, or education of the beneficiary would not qualify for the exclusion.

(3) Certain distributions at specified ages. The third exclusion from the definition of an accumulation distribution is for amounts properly paid or credited to a beneficiary upon the beneficiary's attaining a specified age or ages; provided, (i) the total number of such distributions with respect to that beneficiary cannot exceed 4; (ii) the period between each such distribution is 4 years or more; and (iii) on January 1, 1954, such distributions were required by the specific terms of the governing instrument. Any discretionary invasion of corpus at other times is not excluded under this subparagraph, but does not affect the status of distributions that would otherwise be excluded. If more than four distributions are required to be made to a particular beneficiary at specified ages if he survives to receive them, none of the distributions will be excluded, even though the beneficiary dies before he receives more than four. On the other hand, a direction to make additional distributions to a remainderman will not affect the status of distributions required to be made to the primary beneficiary. For example, a trust agreement provided on January 1, 1954, that when A reached age 25 he would receive one-eighth of the corpus and accumulated income, as then constituted, and similar distributions at ages 30, 35, and 40. It also provided for similar distributions to B after A's death, and for additional discretionary distributions to both A and B. Required distributions to both A and B are excluded, regardless of whether discretionary distributions are made, but discretionary distributions are not excluded. On the other hand, if an additional distribution to A was directed when he reached 45, no distributions to him would be excluded, regardless of when he died.

(4) Certain final distributions. (i) The last exception to the definition of an accumulation distribution is for amounts properly paid or credited to a beneficiary as a final distribution of a trust if the final distribution is made more than 9 years after the date of the last transfer to such trust.

(i) The last exception to the definition of an accumulation distribution is for amounts properly paid or credited to a beneficiary as a final distribution of a trust if the final distribution is made more than 9 years after the date of the last transfer to such trust.

(ii) The term last transfer to such trust includes only transfers, whether by the original grantor or by a third person, made with a donative intent. A transfer arising out of a property right held by the trust is excluded, such as a transfer by a debtor in satisfaction of his indebtedness, or a distribution in liquidation or reorganization of a corporation. If the terms of two or more trusts include cross-remainders on the deaths of life beneficiaries, the donative transfers occurred at the time the trusts were created. The addition of the corpus of one trust to that of another when a remainder falls in is therefore not a new transfer within the meaning of section 665(b)(4).

(iii) For example, under the terms of a trust created July 1, 1950, with an original corpus of $100,000, by H for the benefit of his wife, W, the income of the trust is to be accumulated and added to corpus. Upon the expiration of a 10-year period, the trust is to terminate and its assets, including all accumulated income, are to be distributed to W. No transfers were made by H or other persons to the trust after it was created. Both the trust and W file returns on the calendar year basis. In accordance with its terms, the trust terminated on June 30, 1960, and on August 1, 1960, the trustee made a final distribution of the assets of the trust to W, consisting of investments derived from $100,000 of donated principal, accumulated income of $30,000 attributable to the period July 1, 1950, through December 31, 1959, and income of $3,000 attributable to the period the trust was in existence during 1960. Subpart D is inapplicable to the $3,000 of income of the trust for 1960 since that amount would be deductible by the trust and includible in W's gross income for that year to the extent provided in subpart C. However, the balance of the distribution will qualify as an exclusion from the provisions of subpart D. [T.D. 6500, 25 FR 11814, Nov. 26, 1960, as amended by T.D. 6989, 34 FR 735, Jan. 17, 1969] Sec. 1.665(b)-3 Exclusions under section 663(a)(1).

Subpart D (section 665 and following), part I, subchapter J, chapter 1 of the Code, has no application to an amount which qualifies as an exclusion under section 663(a)(1), relating to gifts, bequests, etc. Sec. 1.665(c)-1 Accumulation distributions of certain foreign trusts;in general.

(a) In the case of a foreign trust created by a U.S. person, the term accumulation distribution for any taxable year means an amount by which the amounts properly paid, credited, or required to be distributed within the meaning of section 661(a)(2) for that year exceed the distributable net income (determined under section 643(a)) of the trust, reduced (but not below zero) by the amount of income required to be distributed currently. (In computing the amount of an accumulation distribution pursuant to the preceding sentence, there is taken into account amounts applied or distributed for the support of a dependent under circumstances specified in section 677(b) and section 678(c) out of corpus or out of other than income for the taxable year and amounts used to discharge or satisfy any person's legal obligation as that term is used in Sec. 1.662(a)-4.)

(b) Although amounts properly paid, credited, or required to be distributed under section 661(a)(2) do not exceed the income of the trust during the taxable year, an accumulation distribution may result if such amounts exceed distributable net income reduced (but not below zero) by the amount required to be distributed currently. This may result from the fact that expenses allocable to corpus are taken into account in determining taxable income and hence distributable net income. However, the provisions of subpart D will not apply unless there is undistributed net income in at least one of the preceding taxable years which began after December 31, 1953, and ended after August 16, 1954. See section 666 and the regulations thereunder.

(c) The provisions of paragraphs (a) and (b) of this section may be illustrated by the examples provided in paragraph (c) of Sec. 1.665(b)-1. [T.D. 6989, 34 FR 735, Jan. 17, 1969] Sec. 1.665(c)-2 Indirect payments to the beneficiary.

(a) In general. Except as provided in paragraph (b) of this section, for purposes of section 665 any amount paid to a U.S. person which is from a payor who is not a U.S. person and which is derived directly or indirectly from a foreign trust created by a U.S. person shall be deemed in the year of payment to the U.S. person to have been directly paid to the U.S. person by the trust. For example, if a nonresident alien receives a distribution from a foreign trust created by a U.S. person and then pays the amount of the distribution over to a U.S. person, the payment of such amount to the U.S. person represents an accumulation distribution to the U.S. person from the trust to the extent that the amount received would have been an accumulation distribution had the trust paid the amount directly to the U.S. person in the year in which the payment was received by the U.S. person. This section also applies in a case where a nonresident alien receives indirectly an accumulation distribution from a foreign trust created by a U.S. person and then pays it over to a U.S. person. An example of such a transaction is one where the foreign trust created by a U.S. person makes the distribution to an intervening foreign trust created by either a U.S. person or a person other than a U.S. person and the intervening trust distributes the amount received to a nonresident alien who in turn pays it over to a U.S. person. Under these circumstances, it is deemed that the payment received by the U.S. person was received directly from a foreign trust created by a U.S. person.

(b) Limitation. In the case of a distribution to a beneficiary who is a U.S. person, paragraph (a) of this section does not apply if the distribution is received by such beneficiary under circumstances indicating lack of intent on the part of the parties to circumvent the purposes for which section 7 of the Revenue Act of 1962 (76 Stat. 985) was enacted. [T.D. 6989, 34 FR 735, Jan. 17, 1969] Sec. 1.665(d)-1 Taxes imposed on the trust.

(a) For the purpose of subpart D (section 665 and following), part I, subchapter J, chapter 1 of the Code, the term taxes imposed on the trust means (for any taxable year) the amount of Federal income taxes which are properly allocable to the undistributed portion of the distributable net income. This amount is the difference between the total taxes of the trust for the year and the amount which would have been paid by the trust had all of the distributable net income, as determined under section 643(a), been distributed. Thus, in determining the amount of taxes imposed on the trust for the purposes of subpart D, there is excluded the portion of the taxes paid by the trust which is attributable to items of gross income which are not includible in distributable net income, such as capital gains allocable to corpus. The rule stated in this paragraph may be illustrated by the following example:

(1) Under the terms of a trust which reports on the calendar year basis the income may be accumulated or distributed to A in the discretion of the trustee and capital gains are allocable to corpus. During the taxable year 1954, the trust had income of $20,000 from royalties, long-term capital gains of $10,000, and expenses of $2,000. The trustee in his discretion made a distribution of $10,000 to A. The taxes imposed on the trust for the purposes of this subpart are $2,713, determined as shown below.

(2) The distributable net income of the trust computed under section 643(a) is $18,000 (royalties of $20,000 less expenses of $2,000). The total taxes paid by the trust are $3,787, computed as follows: Royalties.................................................... $20,000Capital gains................................................ 10,000

------------

Gross income............................................. 30,000Deductions:

Expenses........................................ $2,000

Distributions to A.............................. 10,000

Capital gain deduction.......................... 5,000

Personal exemption.............................. 100

-----------

17,100

------------

Taxable income........................................... 12,900Total income taxes........................................... 3,787

(3) The amount of taxes which would have been paid by the trust, had all of the distributable net income ($18,000) of the trust been distributed to A, is $1,074, computed as follows: Taxable income of the trust.................................. $12,900Less: Undistributed portion of distributable net income 8,000

($18,000-$10,000)...........................................

------------

Balance of taxable income................................ 4,900Income taxes on $4,900....................................... 1,074

(4) The amount of taxes imposed on the trust as defined in this paragraph is $2,713, computed as follows: Total taxes....................................... $3,787

Taxes which would have been paid by the trust 1,074

had all of the distributable net income been

distributed....................................

------------

Taxes imposed on the trust as defined in this 2,713

paragraph......................................

(b) If in any subsequent year an accumulation distribution is made by the trust which results in a throwback to the taxable year, the taxes of the taxable year allocable to the undistributed portion of distributable net income (the taxes imposed on the trust), after the close of the subsequent year, are the taxes prescribed in paragraph (a) of this section reduced by the taxes of the taxable year allowed as credits to beneficiaries on account of amounts deemed distributed on the last day of the taxable year under section 666. See paragraph (f)(4) of Sec. 1.668(b)-2 for an illustration of the application of this paragraph. [T.D. 6500, 25 FR 11814, Nov. 26, 1960. Redesignated by T.D. 6989, 34 FR 735, Jan. 17, 1969] 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 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] Sec. 1.665(e)-2 Application of separate share rule.

In trusts to which the separate share rule of section 663(c) is applicable for any taxable year, subpart D (section 665 and following), part I, subchapter J, of the Code, is applied as if each share were a separate trust. Thus, ``undistributed net income'' and the amount of an ``accumulation distribution'' are computed separately for each share. The ``taxes imposed on the trust'' are allocated as follows:

(a) There is first allocated to each separate share that portion of the ``taxes imposed on the trust'', computed before the allowance of credits under section 642(a), which bears the same relation to the total that the distributable net income of the separate share bears to the distributable net income of the trust, adjusted for this purpose as follows:

(1) There is excluded from distributable net income of the trust and of each separate share any tax-exempt interest, foreign income of a foreign trust, and excluded dividends, to the extent such amounts are included in distributable net income pursuant to section 643(a) (5), (6), and (7); and

(2) The distributable net income of the trust is reduced by any deductions allowable under section 661 for amounts paid, credited, or required to be distributed during the taxable year, and the distributable net income of each separate share is reduced by any such deduction allocable to that share.

(b) The taxes so determined for each separate share are then reduced by that portion of the credits against tax allowable to the trust under section 642(a) in computing the ``taxes imposed on the trust'' which bear the same relation to the total that the items of income allocable to the separate share with respect to which the credit is allowed bear to the total of such items of the trust. The amount of taxes imposed on the trust allocable to a separate share as so determined is then reduced by the amount of the taxes allowed under sections 667 and 668 as a credit to a beneficiary of the separate share on account of any accumulation distribution determined for any taxable year intervening between the year for which the determination is made and the year of an accumulation distribution with respect to which the determination is made. See paragraph (b) of Sec. 1.665(d)-1. [T.D. 6500, 25 FR 11814, Nov. 26, 1960, as amended by T.D. 6989, 34 FR 741, Jan. 17, 1969. Redesignated by T.D. 6989, 34 FR 736, Jan. 17, 1969] Sec. 1.666(a)-1A Amount allocated.

(a) In general. In the case of a trust that is subject to subpart C of part I of subchapter J of chapter 1 of the Code (relating to estates and trusts that may accumulate income or that distribute corpus), section 666(a) prescribes rules for determining the taxable years from which an accumulation distribution will be deemed to have been made and the extent to which the accumulation distribution is considered to consist of undistributed net income. In general, an accumulation distribution made in taxable years beginning after December 31, 1969, is deemed to have been made first from the earliest preceding taxable year of the trust for which there is undistributed net income. An accumulation distribution made in a taxable year beginning before January 1, 1970, is deemed to have been made first from the most recent preceding taxable year of the trust for which there is undistributed net income. See Sec. 1.665(e)-1A for the definition of ``preceding taxable year.''

(b) Distributions by domestic trusts--(1) Taxable years beginning after December 31, 1973. An accumulation distribution made by a trust (other than a foreign trust created by a U.S. person) in any taxable year beginning after December 31, 1973, is allocated to the preceding taxable years of the trust (defined in Sec. 1.665(e)-1A(a)(1)(ii) as those beginning after December 31, 1968) according to the amount of undistributed net income of the trust for such years. For this purpose, an accumulation distribution is first to be allocated to the earliest such preceding taxable year in which there is undistributed net income and shall then be allocated, beginning with the next earliest, to any remaining preceding taxable years of the trust. The portion of the accumulation distribution allocated to the earliest preceding taxable year is the amount of the undistributed net income for that preceding taxable year. The portion of the accumulation distribution allocated to any preceding taxable year subsequent to the earliest such preceding taxable year is the excess of the accumulation distribution over the aggregate of the undistributed net income for all earlier preceding taxable years. See paragraph (d) of this section for adjustments to undistributed net income for prior distributions. The provisions of this subparagraph may be illustrated by the following example:

Example. In 1977, a domestic trust reporting on the calendar year basis makes an accumulation distribution of $33,000. Therefore, years before 1969 are ignored. In 1969, the trust had $6,000 of undistributed net income; in 1970, $4,000; in 1971, none; in 1972, $7,000; in 1973, $5,000; in 1974, $8,000; in 1975, $6,000; and $4,000 in 1976. The accumulation distribution is deemed distributed $6,000 in 1969, $4,000 in 1970, none in 1971, $7,000 in 1972, $5,000 in 1973, $8,000 in 1974, and $3,000 in 1975.

(2) Taxable years beginning after December 31, 1969, and before January 1, 1974. If a trust (other than a foreign trust created by a U.S. person) makes an accumulation distribution in a taxable year beginning after December 31, 1969, and before January 1, 1974, the distribution will be deemed distributed in the same manner as accumulation distributions qualifying under subparagraph (1) of this paragraph, except that the first year to which the distribution may be thrown back cannot be earlier than the fifth taxable year of the trust preceding the year in which the accumulation distribution is made. Thus, for example, in the case of an accumulation distribution made in the taxable year of a domestic trust which begins on January 1, 1972, the taxable year of the trust beginning on January 1, 1967, would be the first year in which the distribution was deemed made, assuming that there was undistributed net income for 1967. See also Sec. 1.665(e)-1A(a)(1). The provisions of this subparagraph may be illustrated by the following example:

Example. In 1973, a domestic trust, reporting on the calendar year basis, makes an accumulation distribution of $25,000. In 1968, the fifth year preceding 1973, the trust had $7,000 of undistributed net income; in 1969, none; in 1970, $12,000; in 1971, $4,000; in 1972, $4,000. The accumulation distribution is deemed distributed in the amounts of $7,000 in 1968, none in 1969, $12,000 in 1970, $4,000 in 1971, and $2,000 in 1972.

(3) Taxable years beginning after December 31, 1968, and before January 1, 1970. Accumulation distributions made in taxable years of the trust beginning after December 31, 1968, and before January 1, 1970, are allocated to prior years according to Sec. 1.666(a)-1.

(c) Distributions by foreign trusts--(1) Foreign trusts created solely by U.S. persons--(i) Taxable years beginning after December 31, 1969. If a foreign trust created by a U.S. person makes an accumulation distribution in any taxable year beginning after December 31, 1969, the distribution is allocated to the trust's preceding taxable years (defined in Sec. 1.665(e)-1A(a)(2) as those beginning after Dec. 31, 1953, and ending after Aug. 16, 1954) according to the amount of undistributed net income of the trust for such years. For this purpose, an accumulation distribution is first allocated to the earliest such preceding taxable year in which there is undistributed net income and shall then be allocated in turn, beginning with the next earliest, to any remaining preceding taxable years of the trust. The portion of the accumulation distribution allocated to the earliest preceding taxable year is the amount of the undistributed net income for that preceding taxable year. The portion of the accumulation distribution allocated to any preceding taxable year subsequent to the earliest such preceding taxable year is the excess of the accumulation distribution over the aggregate of the undistributed net income for all earlier preceding taxable years. See paragraph (d) of this section for adjustments to undistributed net income for prior distributions. The provisions of this subdivision may be illustrated by the following example:

Example. In 1971, a foreign trust created by a U.S. person, reporting on the calendar year basis, makes an accumulation distribution of $50,000. In 1961, the trust had $12,000 of undistributed net income; in 1962, none; in 1963, $10,000; in 1964, $8,000; in 1965, $5,000; in 1966, $14,000; in 1967, none; in 1968, $3,000; in 1969, $2,000; and in 1970, $1,000. The accumulation distribution is deemed distributed in the amounts of $12,000 in 1961, none in 1962, $10,000 in 1963, $8,000 in 1964, $5,000 in 1965, $14,000 in 1966, none in 1967, and $1,000 in 1968.

(ii) Taxable years beginning after December 31, 1968, and before January 1, 1970. Accumulation distributions made in taxable years of the trust beginning after December 31, 1968, and before January 1, 1970, are allocated to prior years according to Sec. 1.666(a)-1.

(2) Foreign trusts created partly by U.S. persons--(i) Taxable years beginning after December 31, 1969. If a trust that is in part a foreign trust created by a U.S. person and in part a foreign trust created by a person other than a U.S. person makes an accumulation distribution in any year after December 31, 1969, the distribution is deemed made from the undistributed net income of the foreign trust created by a U.S. person in the proportion that the total undistributed net income for all preceding years of the foreign trust created by the U.S. person bears to the total undistributed net income for all years of the entire foreign trust. In addition, such distribution is deemed made from the undistributed net income of the foreign trust created by a person other than a U.S. person in the proportion that the total undistributed net income for all preceding years of the foreign trust created by a person other than a U.S. person bears to the total undistributed net income for all years of the entire foreign trust. Accordingly, an accumulation distribution of such a trust is composed of two portions with one portion relating to the undistributed net income of the foreign trust created by the U.S. person and the other portion relating to the undistributed net income of the foreign trust created by the person other than a U.S. person. For these purposes, each portion of an accumulation distribution made in any taxable year is first allocated to each of such preceding taxable years in turn, beginning with the earliest preceding taxable year, as defined in Sec. 1.665(e)-1A(a), of the applicable foreign trusts, to the extent of the undistributed net income for the such trust for each of those years. Thus, each portion of an accumulation distribution is deemed to have been made from the earliest accumulated income of the applicable trust. If the foreign trust created by a U.S. person makes an accumulation distribution in any year beginning after December 31, 1969, the distribution is included in the beneficiary's income for that year to the extent of the undistributed net income of the trust for the trust's preceding taxable years which began after December 31, 1953, and ended after August 16, 1954. The provisions of this subdivision may be illustrated by the following example:

Example. A trust is created in 1962 under the laws of Country X by the transfer to a trustee in Country X of property by both a U.S. person and a person other than a U.S. person. Both the trust and the only beneficiary of the trust (who is a U.S. person) report their taxable income on a calendar year basis. On March 31, 1974, the trust makes an accumulation distribution of $150,000 to the beneficiary. The distributable net income of both the portion of the trust which is a foreign trust created by a U.S. person and the portion of the trust which is a foreign trust created by a person other than a U.S. person for each year is computed in accordance with the provisions of paragraph (b)(3) of Sec. 1.643(d)-1 and the undistributed net income for each portion of the trust for each year is computed as described in paragraph (b) of Sec. 1.665(a)-1A. For taxable years 1962 through 1973, the portion of the trust which is a foreign trust created by a U.S. person and the portion of the trust which is a foreign trust created by a person other than a U.S. person had the following amounts of undistributed net income: ----------------------------------------------------------------------------------------------------------------

Undistributed net

Undistributed net income-portion of the

Year income-portion of the trust created by a

trust created by a person other than a

U.S. person U.S. person----------------------------------------------------------------------------------------------------------------1962............................................................ $7,000 $4,0001963............................................................ 12,000 7,0001964............................................................ None None1965............................................................ 11,000 5,0001966............................................................ 8,000 3,0001967............................................................ None None1968............................................................ 4,000 2,0001969............................................................ 17,000 8,0001970............................................................ 16,000 9,0001971............................................................ None None1972............................................................ 25,000 12,0001973............................................................ 20,000 10,000

-----------------------------------------------

Totals......................................................... 120,000 60,000---------------------------------------------------------------------------------------------------------------- The accumulation distribution in the amount of $150,000 is deemed to have been distributed in the amount of $100,000 (120,000/180,000x$150,000) from the portion of the trust which is a foreign trust created by a U.S. person and in the amount of $39,000, which is less than $50,000 (60,000/180,000x$150,000), from the portion of the trust which is a foreign trust created by a person other than a U.S. person computed as follows: ----------------------------------------------------------------------------------------------------------------

Throwback to preceding

Throwback to years of portion of the

preceding years of entire foreign trust

Year foreign trust which is not a foreign

created by a U.S. trust created by a U.S.

person person----------------------------------------------------------------------------------------------------------------1962.............................................................. $7,000 None1963.............................................................. 12,000 None1964.............................................................. None None1965.............................................................. $11,000 None1966.............................................................. 8,000 None1967.............................................................. None None1968.............................................................. 4,000 None1969.............................................................. 17,000 $8,0001970.............................................................. 16,000 9,0001971.............................................................. None None1972.............................................................. $25,000 $12,0001973.............................................................. None 10,000

---------------------------------------------

Totals........................................................... 100,000 39,000---------------------------------------------------------------------------------------------------------------- Pursuant to this paragraph, the accumulation distribution in the amount of $100,000 from the portion of the trust which is a foreign trust created by a U.S. person is included in the beneficiary's income for 1974, as the amount represents undistributed net income of the trust for the trust's preceding taxable years which began after December 31, 1953, and ended after August 16, 1954. The accumulation distribution in the amount of $50,000 from the portion of the trust which is a foreign trust created by a person other than a U.S. person is included in the beneficiary's income for 1974 to the extent of the undistributed net income of the trust for the preceding years beginning after December 31, 1968. Accordingly, with respect to the portion of the trust which is a foreign trust created by a person other than a U.S. person, only the undistributed net income for the years 1969 through 1973, which totals $39,000, is includible in the beneficiary's income for 1974. Thus, of the $150,000 distribution made in 1974, the beneficiary is required to include a total of $139,000 in his income for 1974. The balance of $11,000 is deemed to represent a distribution of corpus.

(3) Foreign trusts created by non-U.S. persons. To the extent that a foreign trust is a foreign trust created by a person other than a U.S. person, an accumulation distribution is included in the beneficiary's income for the year paid, credited, or required to be distributed to the extent provided under paragraph (b) of this section.

(d) Reduction of undistributed net income for prior accumulation distributions. For the purposes of allocating to any preceding taxable year an accumulation distribution of the taxable year, the undistributed net income of such preceding taxable year is reduced by the amount from such year deemed distributed in any accumulation distribution of undistributed net income made in any taxable year intervening between such preceding taxable year and the taxable year. Accordingly, for example, if a trust has undistributed net income for 1974 and makes accumulation distributions during the taxable years 1978 and 1979, in determining that part of the 1979 accumulation distribution that is thrown back to 1974 the undistributed net income for 1974 is first reduced by the amount of the undistributed net income for 1974 deemed distributed in the 1978 accumulation distribution.

(e) Rule when no undistributed net income. If, before the application of the provisions of subpart D to an accumulation distribution for the taxable year, there is no undistributed net income for a preceding taxable year, then no portion of the accumulation distribution is undistributed net income deemed distributed on the last day of such preceding taxable year. Thus, if an accumulation distribution is made during the taxable year 1975 from a trust whose earliest preceding taxable year is taxable year 1970, and the trust had no undistributed net income for 1970, then no portion of the 1975 accumulation distribution is undistributed net income deemed distributed on the last day of 1970. [T.D. 7204, 37 FR 17143, Aug. 25, 1972] Sec. 1.666(b)-1A Total taxes deemed distributed.

(a) If an accumulation distribution is deemed under Sec. 1.666(a)-1A to be distributed on the last day of a preceding taxable year and the amount is not less than the undistributed net income for such preceding taxable year, then an additional amount equal to the ``taxes imposed on the trust attributable to the undistributed net income'' (as defined in Sec. 1.665(d)-1A(b)) for such preceding taxable year is also deemed distributed under section 661(a)(2). For example, a trust has undistributed net income of $8,000 for the taxable year 1974. The taxes imposed on the trust attributable to the undistributed net income are $3,032. During the taxable year 1977, an accumulation distribution of $8,000 is made to the beneficiary, which is deemed under Sec. 1.666(a)-1A to have been distributed on the last day of 1974. The 1977 accumulation distribution is not less than the 1974 undistributed net income. Accordingly, the taxes of $3,032 imposed on the trust attributable to the undistributed net income for 1974 are also deemed to have been distributed on the last day of 1974. Thus, a total of $11,032 will be deemed to have been distributed on the last day of 1974.

(b) For the purpose of paragraph (a) of this section, the undistributed net income of any preceding taxable year and the taxes imposed on the trust for such preceding taxable year attributable to such undistributed net income are computed after taking into account any accumulation distributions of taxable years intervening between such preceding taxable year and the taxable year. See paragraph (d) of Sec. 1.666(a)-1A. [T.D. 7204, 37 FR 17145, Aug. 25, 1972] Sec. 1.666(c)-1A Pro rata portion of taxes deemed distributed.

(a) If an accumulation distribution is deemed under Sec. 1.666(a)-1A to be distributed on the last day of a preceding taxable year and the amount is less than the undistributed net income for such preceding taxable year, then an additional amount is also deemed distributed under section 661(a)(2). The additional amount is equal to the ``taxes imposed on the trust attributable to the undistributed net income'' (as defined in Sec. 1.665(a)-1A(b)) for such preceding taxable year, multiplied by a fraction, the numerator of which is the amount of the accumulation distribution allocated to such preceding taxable year and the denominator of which is the undistributed net income for such preceding taxable year. See paragraph (b) of example 1 and paragraphs (c) and (f) of example 2 in Sec. 1.666(c)-2A for illustrations of this paragraph.

(b) For the purpose of paragraph (a) of this section, the undistributed net income of any preceding taxable year and the taxes imposed on the trust for such preceding taxable year attributable to such undistributed net income are computed after taking into account any accumulation distributions of any taxable years intervening between such preceding taxable year and the taxable year. See paragraph (d) of Sec. 1.666(a)-1A and paragraph (c) of example 1 and paragraphs (e) and (h) of example 2 in Sec. 1.666(c)-2A. [T.D. 7204, 37 FR 17145, Aug. 25, 1972] Sec. 1.666(c)-2A Illustration of the provisions of section 666 (a),(b), and (c).

The application of the provisions of Sec. Sec. 1.666(a)-1A, 1.666(b)-1A, and 1.666(c)-1A may be illustrated by the following examples:

(a) A trust created on January 1, 1974, makes accumulation distributions as follows: 1979..............................................................$7,0001980..............................................................26,000 For 1974 through 1978, the undistributed portion of distributable net income, taxes imposed on the trust attributable to the undistributed net income, and undistributed net income are as follows: ----------------------------------------------------------------------------------------------------------------

Taxes imposed on

Undistributed the trust

Year portion of attributable to Undistributed

distributable the undistributed net income

net income net income----------------------------------------------------------------------------------------------------------------1974.......................................................... $12,100 $3,400 $8,7001975.......................................................... 16,100 5,200 10,9001976.......................................................... 6,100 1,360 4,7401977.......................................................... None None None1978.......................................................... 10,100 2,640 7,460---------------------------------------------------------------------------------------------------------------- The trust has no undistributed capital gain.

(b) Since the entire amount of the accumulation distribution for 1979 ($7,000) is less than the undistributed net income for 1974 ($8,700), an additional amount of $2,736 (7,000/8,700x$3,400) is deemed distributed under section 666(c).

(c) In allocating the accumulation distribution for 1980, the amount of undistributed net income for 1974 will reflect the accumulation distribution for 1979. The undistributed net income for 1974 will then be $1,700 and the taxes imposed on the trust for 1974 will be $664, determined as follows: Undistributed net income as of the close of 1974............ $8,700Less: Accumulation distribution (1979)...................... 7,000

-----------

Balance (undistributed net income as of the close of 1,700

1979)..................................................

===========Taxes imposed on the trust attributable to the undistributed 664

net income as of the close of 1979 (1,700/8,700x$3,400)....

(d) The accumulation distribution of $26,000 for 1980 is deemed to have been made on the last day of the preceding taxable years of the trust to the extent of $24,800, the total of the undistributed net income for such years, as shown in the tabulation below. In addition, $9,864, the total taxes imposed on the trust attributable to the undistributed net income for such years is also deemed to have been distributed on the last day of such years, as shown below: ------------------------------------------------------------------------

Undistributed net Taxes imposed on the

Year income trust------------------------------------------------------------------------1974........................ $1,700 $6641975........................ 10,900 5,2001976........................ 4,740 1,3601977........................ None None1978........................ 7,460 2,6401979........................ None None------------------------------------------------------------------------

(a) Under the terms of a trust instrument, the trustee has discretion to accumulate or distribute the income to X and to invade corpus for the benefit of X. The entire income of the trust is from royalties. Both X and the trust report on the calendar year basis. All of the income for 1974 was accumulated. The distributable net income of the trust for the taxable year 1974 is $20,100 and the income taxes paid by the trust for 1974 attributable to the undistributed net income are $7,260. All of the income for 1975 and 1976 was distributed and in addition the trustee made accumulation distributions within the meaning of section 665(b) of $5,420 for each year.

(b) The undistributed net income of the trust determined under section 665(a) as of the close of 1974, is $12,840, computed as follows: Distributable net income.................................... $20,100Less: Taxes imposed on the trust attributable to the 7,260

undistributed net income...................................

-----------

Undistributed net income as of the close of 1974........ 12,840

(c) The accumulation distribution of $5,420 made during the taxable year 1975 is deemed under section 666(a) to have been made on December 31, 1974. Since this accumulation distribution is less than the 1974 undistributed net income of $12,840, a portion of the taxes imposed on the trust for 1974 is also deemed under section 666(c) to have been distributed on December 31, 1974. The total amount deemed to have been distributed to X on December 31, 1974 is $8,484, computed as follows: Accumulation distribution................................... $5,420Taxes deemed distributed (5,420/ 12,840x$7,260)............. 3,064

-----------

Total................................................... 8,484

(d) After the application of the provisions of subpart D to the accumulation distribution of 1975, the undistributed net income of the trust for 1974 is $7,420, computed as follows: Undistributed net income as of the close of 1974............ $12,840Less: 1975 accumulation distribution deemed distributed on 5,420

December 31, 1974 (paragraph (c) of this example)..........

-----------

Undistributed net income for 1974 as of the close of 7,420

1975...................................................

(e) The taxes imposed on the trust attributable to the undistributed net income for the taxable year 1974, as adjusted to give effect to the 1975 accumulation distribution, amount to $4,196, computed as follows: Taxes imposed on the trust attributable to undistributed net $7,260

income as of the close of 1974.............................Less: Taxes deemed distributed in 1974...................... 3,064

-----------

Taxes attributable to the undistributed net income 4,196

determined as of the close of 1975.....................

(f) The accumulation distribution of $5,420 made during the taxable year 1976 is, under section 666(a), deemed a distribution to X on December 31, 1974, within the meaning of section 661(a)(2). Since the accumulation distribution is less than the 1974 adjusted undistributed net income of $7,420, the trust is deemed under section 666(c) also to have distributed on December 31, 1974, a portion of the taxes imposed on the trust for 1974. The total amount deemed to be distributed on December 31, 1974, with respect to the accumulation distribution made in 1976, is $8,484, computed as follows: Accumulation distribution................................... $5,420Taxes deemed distributed (5,420/ 7,420x$4,196).............. 3,064

-----------

Total................................................... 8,484

(g) After the application of the provisions of subpart D to the accumulation distribution of 1976, the undistributed net income of the trust for 1974 is $2,000, computed as follows: Undistributed net income for 1974 as of the close of 1975... $7,420Less: 1976 accumulation distribution deemed distributed on 5,420

December 31, 1974 (paragraph (f) of this example)..........

-----------

Undistributed net income for 1974 as of the close of 2,000

1976...................................................

(h) The taxes imposed on the trust attributable to the undistributed net income of the trust for the taxable year 1974, determined as of the close of the taxable year 1976, amount to $1,132 ($4,196 less $3,064). [T.D. 7204, 37 FR 17145, Aug. 25, 1972] Sec. 1.666(d)-1A Information required from trusts.

(a) Adequate records required. For all taxable years of a trust, the trustee must retain copies of the trust's income tax return as well as information pertaining to any adjustments in the tax shown as due on the return. The trustee shall also keep the records of the trust required to be retained by section 6001 and the regulations thereunder for each taxable year as to which the period of limitations on assessment of tax under section 6501 has not expired. If the trustee fails to produce such copies and records, and such failure is due to circumstances beyond the reasonable control of the trustee or any predecessor trustee, the trustee may reconstruct the amount of corpus, accumulated income, etc., from competent sources (including, to the extent permissible, Internal Revenue Service records). To the extent that an accurate reconstruction can be made for a taxable year, the requirements of this paragraph shall be deemed satisfied for such year.

(b) Rule when information is not available--(1) Accumulation distributions. If adequate records (as required by paragraph (a) of this section) are not available to determine the proper application of subpart D to an accumulation distribution made in a taxable year by a trust, such accumulation distribution shall be deemed to consist of undistributed net income earned during the earliest preceding taxable year (as defined in Sec. 1.665(e)-1A) of the trust in which it can be established that the trust was in existence. If adequate records are available for some years, but not for others, the accumulation distribution shall be allocated first to the earliest preceding taxable year of the trust for which there are adequate records and then to each subsequent preceding taxable year for which there are adequate records. To the extent that the distribution is not allocated in such manner to years for which adequate records are available, it will be deemed distributed on the last day of the earliest preceding taxable year of the trust in which it is established that the trust was in existence and for which the trust has no records. The provisions of this subparagraph may be illustrated by the following example:

Example. A trust makes a distribution in 1975 of $100,000. The trustee has adequate records for 1973, 1974, and 1975. The records show that the trust is on the calendar year basis, had distributable net income in 1975 of $20,000, and undistributed net income in 1974 of $15,000, and in 1973 of $16,000. The trustee has no other records of the trust except for a copy of the trust instrument showing that the trust was established on January 1, 1965. He establishes that the loss of the records was due to circumstances beyond his control. Since the distribution is made in 1975, the earliest ``preceding taxable year'', as defined in Sec. 1.665(e)-1A, is 1969. Since $80,000 of the distribution is an accumulation distribution, and $31,000 thereof is allocated to 1974 and 1973, $49,000 is deemed to have been distributed on the last day of 1969.

(2) Taxes. (i) If an amount is deemed under this paragraph to be undistributed net income allocated to a preceding taxable year for which adequate records are not available, there shall be deemed to be ``taxes imposed on the trust'' for such preceding taxable year an amount equal to the taxes that the trust would have paid if the deemed undistributed net income were the amount remaining when the taxes were subtracted from taxable income of the trust for such year. For example, assume that an accumulation distribution in 1975 of $100,000 is deemed to be undistributed net income from 1971, and that the taxable income required to produce $100,000 after taxes in 1971 would be $284,966. Therefore the amount deemed to be ``taxes imposed on the trust'' for such preceding taxable year is $184,966.

(i) If an amount is deemed under this paragraph to be undistributed net income allocated to a preceding taxable year for which adequate records are not available, there shall be deemed to be ``taxes imposed on the trust'' for such preceding taxable year an amount equal to the taxes that the trust would have paid if the deemed undistributed net income were the amount remaining when the taxes were subtracted from taxable income of the trust for such year. For example, assume that an accumulation distribution in 1975 of $100,000 is deemed to be undistributed net income from 1971, and that the taxable income required to produce $100,000 after taxes in 1971 would be $284,966. Therefore the amount deemed to be ``taxes imposed on the trust'' for such preceding taxable year is $184,966.

(ii) The credit allowed by section 667(b) shall not be allowed for any amount deemed under this subparagraph to be ``taxes imposed on the trust.'' [T.D. 7204, 37 FR 17146, Aug. 25, 1972] Sec. 1.666(a)-1 Amount allocated.

(a)(1) If a trust other than a foreign trust created by a U.S. person makes an accumulation distribution in any taxable year, the distribution is included in the beneficiary's gross income for that year to the extent of the undistributed net income of the trust for the preceding 5 years. It is therefore necessary to determine the extent to which there is undistributed net income for the preceding 5 years. For this purpose, an accumulation distribution made in any taxable year is allocated to each of the 5 preceding taxable years in turn, beginning with the most recent year, to the extent of the undistributed net income of each of those years. Thus, an accumulation distribution is deemed to have been made from the most recently accumulated income of the trust.

(1) If a trust other than a foreign trust created by a U.S. person makes an accumulation distribution in any taxable year, the distribution is included in the beneficiary's gross income for that year to the extent of the undistributed net income of the trust for the preceding 5 years. It is therefore necessary to determine the extent to which there is undistributed net income for the preceding 5 years. For this purpose, an accumulation distribution made in any taxable year is allocated to each of the 5 preceding taxable years in turn, beginning with the most recent year, to the extent of the undistributed net income of each of those years. Thus, an accumulation distribution is deemed to have been made from the most recently accumulated income of the trust.

(2) If a foreign trust created by a U.S. person makes an accumulation distribution in any year after December 31, 1962, the distribution is included in the beneficiary's gross income for that year to the extent of the undistributed net income of the trust for the trust's preceding taxable years which began after December 31, 1953, and ended after August 16, 1954. It is therefore necessary to determine the extent to which there is undistributed net income for such preceding taxable years. For this purpose, an accumulation distribution made in any taxable year is first allocated to each of such preceding taxable years in turn, beginning with the most recent year, to the extent of the undistributed net income of each of those years. Thus, an accumulation distribution is deemed to have been made from the most recently accumulated income of the trust.

(3) If a trust that is in part a foreign trust created by a U.S. person and in part a foreign trust created by a person other than a U.S. person makes an accumulation distribution in any year after December 31, 1962, the distribution is deemed made from the undistributed net income of the foreign trust created by a U.S. person in the proportion that the total undistributed net income for all preceding years of the foreign trust created by the U.S. person bears to the total undistributed net income for all years of the entire foreign trust. In addition, such distribution is deemed made from the undistributed net income of the foreign trust created by a person other than a U.S. person in the proportion that the total undistributed net income for all preceding years of the foreign trust created by a person other than a U.S. person bears to the total undistributed net income for all years of the entire foreign trust. Accordingly, an accumulation distribution of such a trust is composed of two portions with one portion relating to the undistributed net income of the foreign trust created by the U.S. person and the other portion relating to the undistributed net income of the foreign trust created by the person other than a U.S. person. For these purposes, each portion of an accumulation distribution made in any taxable year is first allocated to each of such preceding taxable years in turn, beginning with the most recent year, to the extent of the undistributed net income for the applicable foreign trust for each of those years. Thus, each portion of an accumulation distribution is deemed to have been made from the most recently accumulated income of the applicable trust. If the foreign trust created by a U.S. person makes an accumulation distribution in any year after December 31, 1962, the distribution is included in the beneficiary's gross income for that year to the extent of the undistributed net income of the trust for the trust's preceding taxable years which began after December 31, 1953, and ended after August 16, 1954. If the foreign trust created by a person other than a U.S. person makes an accumulation distribution in any taxable year, the distribution is included in the beneficiary's gross income for that year to the extent of the undistributed net income of the trust for the preceding 5 years.

(b) If, before the application of the provisions of subpart D (section 665 and following), part I, subchapter J, chapter 1 of the Code, to an accumulation distribution for the taxable year, there is no undistributed net income for a preceding taxable year, then no portion of the accumulation distribution is deemed distributed on the last day of such preceding taxable year. Thus, if an accumulation distribution is made during the taxable year 1960 and the trust had no undistributed net income for the taxable year 1959, then no portion of the 1960 accumulation distribution is deemed distributed on the last day of 1959. For purposes of subpart D, the term 5 preceding taxable years includes only the 5 taxable years immediately preceding the taxable year in which the accumulation distribution is made and which are subject to part I (section 641 and following) of such subchapter J even though the trust has no undistributed net income during one or more of those years.

(c) Paragraphs (a) and (b) of this section may be illustrated by the following examples:

Example 1. In 1964, a domestic trust, reporting on the calendar year basis, makes an accumulation distribution of $25,000. In 1963, the trust had $7,000 of undistributed net income; in 1962, none; in 1961, $12,000; in 1960, $4,000; in 1959, $4,000. The accumulation distribution is deemed distributed $7,000 in 1963, none in 1962, $12,000 in 1961, $4,000 in 1960, and $2,000 in 1959.

Example 2. In 1964, a foreign trust created by a U.S. person, reporting on the calendar year basis, makes an accumulation distribution of $50,000. In 1963, the trust had $12,000 of undistributed net income; in 1962, none; in 1961, $10,000; in 1960, $8,000; in 1959, $5,000; in 1958, $14,000; in 1957, none; in 1956, $3,000; in 1955, $2,000; and in 1954, $1,000. The accumulation distribution is deemed distributed $12,000 in 1963, none in 1962, $10,000 in 1961, $8,000 in 1960, $5,000 in 1959, $14,000 in 1958, none in 1957, $1,000 in 1956.

Example 3. A trust is created in 1952 under the laws of Country X by the transfer to a trustee in Country X of money and property by both a U.S. person and a person other than a U.S. person. Both the trust and the only beneficiary of the trust (who is a U.S. person) report their taxable income on a calendar year basis. On March 31, 1964, the trust makes an accumulation distribution of $150,000 to the U.S. beneficiary. The distributable net income of both the portion of the trust which is a foreign trust created by a U.S. person and the portion of the trust which is a foreign trust created by a person other than a U.S. person for each year is computed in accordance with the provisions of paragraph (b)(3) of Sec. 1.643(d)-1 and the undistributed net income for each portion of the trust for each year is computed as described in paragraph (b) of Sec. 1.665(a)-1. For the taxable years 1952 through 1963, the portion of the trust which is a foreign trust created by a U.S. person and the portion of the trust which is a foreign trust created by a person other than a U.S. person had the following amounts of undistributed net income: ----------------------------------------------------------------------------------------------------------------

Undistributed net

Undistributed net income--portion of

Year income--portion of the trust created by

the trust created by a person other than a

a U.S. person U.S. person----------------------------------------------------------------------------------------------------------------1963.............................................................. $20,000 $10,0001962.............................................................. 25,000 12,0001961.............................................................. None None1960.............................................................. 16,000 9,0001959.............................................................. 17,000 8,0001958.............................................................. 4,000 2,0001957.............................................................. None None1956.............................................................. 8,000 3,0001955.............................................................. 11,000 5,0001954.............................................................. None None1953.............................................................. 12,000 7,0001952.............................................................. 7,000 4,000

---------------------------------------------

Totals.......................................................... 120,000 60,000---------------------------------------------------------------------------------------------------------------- The accumulation distribution in the amount of $150,000 is deemed to have been distributed in the amount of $100,000 (120,000/180,000x$150,000) from the portion of the trust which is a foreign trust created by a U.S. person, and in the amount of $50,000 (60,000/180,000x$150,000) from the portion of the trust which is a foreign trust created by a person other than a U.S. person computed as follows: ----------------------------------------------------------------------------------------------------------------

Throwback to

preceding years of

Throwback to portion of the entire

Year preceding years of foreign trust which

foreign trust created is not a foreign

by a U.S. person trust created by a

U.S. person----------------------------------------------------------------------------------------------------------------1963.............................................................. $20,000 $10,0001962.............................................................. 25,000 12,0001961.............................................................. None None1960.............................................................. 16,000 9,0001959.............................................................. 17,000 8,0001958.............................................................. 4,000 2,0001957.............................................................. None None1956.............................................................. 8,000 3,0001955.............................................................. 10,000 5,0001954.............................................................. None None1953.............................................................. None 1,0001952.............................................................. None None

---------------------------------------------

Totals.......................................................... 100,000 50,000---------------------------------------------------------------------------------------------------------------- Pursuant to paragraph (a)(3) of this section, the accumulation distribution in the amount of $100,000 from the portion of the trust which is a foreign trust created by a U.S. person is included in the beneficiary's gross income for 1964, as this amount represents undistributed net income of the trust for the trust's preceding taxable years which began after December 31, 1953, and ended after August 16, 1954. The accumulation distribution in the amount of $50,000 from the portion of the trust which is a foreign trust created by a person other than a U.S. person is included in the beneficiary's gross income for 1964 to the extent of the undistributed net income of the trust for the preceding 5 years. Accordingly, with respect to the portion of the trust which is a foreign trust created by a person other than a U.S. person only the undistributed net income for the years 1959 through 1963 which totals $39,000 is includible in the beneficiary's gross income for 1964. Thus, of the $150,000 distribution made in 1964, the beneficiary is required to include a total of $139,000 in his gross income for 1964.

Example 4. Assume the same facts as in example 3 and, in addition, that by December 31, 1964, the undistributed net income for 1964 is determined to be $20,000, and that in accordance with the provisions of paragraph (b)(3) of Sec. 1.643(d)-1 and paragraph (b) of Sec. 1.665(a)-1, $10,000 is allocated to the portion of the trust which is a foreign trust created by a U.S. person and $10,000 is allocated to the portion of the trust which is a foreign trust created by a person other than a U.S. person. On March 31, 1965, the trust makes an accumulation distribution of $25,000 to the U.S. beneficiary. For the taxable years 1952 through 1964, the portion of the trust which is a foreign trust created by a U.S. person and the portion of the trust which is a foreign trust created by a person other than a U.S. person had the following amounts of undistributed net income: ----------------------------------------------------------------------------------------------------------------

Undistributed net

Undistributed net income--portion of

Year income--portion of the trust created by

the trust created by a person other than a

a U.S. person U.S. person----------------------------------------------------------------------------------------------------------------1964.............................................................. $10,000 $10,0001963.............................................................. None None1962.............................................................. None None1961.............................................................. None None1960.............................................................. None None1959.............................................................. None None1958.............................................................. None None1957.............................................................. None None1956.............................................................. None None1955.............................................................. 1,000 None1954.............................................................. None None1953.............................................................. 12,000 6,0001952.............................................................. 7,000 4,000

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Totals.......................................................... 30,000 20,000---------------------------------------------------------------------------------------------------------------- The accumulation distribution is deemed to have been distributed in the amount of $15,000 (30,000/50,000x$25,000), from the portion of the trust which is a foreign trust created by a U.S. person, and in the amount of $10,000 (20,000/50,000x$25,000) from the portion of the trust which is a foreign trust created by a person other than a U.S. person computed as follows: ----------------------------------------------------------------------------------------------------------------

Throwback to

preceding years of

Throwback to portion of the entire

Year preceding years of foreign trust which

foreign trust created is not a foreign

by U.S. person trust created by a

U.S. person----------------------------------------------------------------------------------------------------------------1964.............................................................. $10,000 $10,0001963.............................................................. None None1962.............................................................. None None1961.............................................................. None None1960.............................................................. None None1959.............................................................. None None1958.............................................................. None None1957.............................................................. None None1956.............................................................. None None1955.............................................................. 1,000 None1954.............................................................. None None1953.............................................................. 4,000 None1952.............................................................. None None

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Totals.......................................................... 15,000 10,000---------------------------------------------------------------------------------------------------------------- Pursuant to paragraph (a)(3) of this section, only $11,000 of the accumulation distribution in the amount of $15,000 from the portion of the trust which is a foreign trust created by a U.S. person is includible in the beneficiary's gross income for 1965 as the $11,000 amount represents undistributed net income of the trust for the trust's preceding taxable years which began after December 31, 1953, and ended after August 16, 1954. The accumulation distribution in the amount of $10,000 from the portion of the trust which is a foreign trust created by a person other than a U.S. person is included in the beneficiary's gross income for 1965 to the extent of the undistributed net income of the trust for the preceding 5 years. Accordingly, the entire $10,000 (representing the undistributed net income for the year 1964) is includible in the beneficiary's gross income for 1965. Thus, of the $25,000 distribution made in 1965, the beneficiary is required to include a total of $21,000 in his gross income for 1965.

(d) For the purposes of allocating to any preceding taxable year an accumulation distribution of the taxable year, the undistributed net income of such preceding taxable year is computed without regard to the accumulation distribution of the taxable year or of taxable years following the taxable year. However, accumulation distributions of any taxable years intervening between such preceding taxable year and the taxable year are taken into account. Accordingly, if a trust has undistributed net income for the taxable year 1954 and makes an accumulation distribution during the taxable year 1955, the undistributed net income for 1954 is computed without regard to the accumulation distribution for 1955 or any subsequent year. If the trust makes a further accumulation distribution for 1956, the undistributed net income for 1954 is computed without regard to the accumulation distribution for 1956 or subsequent years; but in determining the undistributed net income for 1954 for purposes of the 1956 accumulation distribution the accumulation distribution for 1955 will be taken into account. [T.D. 6500, 25 FR 11814, Nov. 26, 1960, as amended by T.D. 6989, 34 FR 736, Jan. 17, 1969] Sec. 1.666(b)-1 Total taxes deemed distributed.

(a) If an accumulation distribution is deemed under Sec. 1.666(a)-1 to be distributed on the last day of a preceding taxable year and the amount is not less than the undistributed net income for such preceding taxable year, then an additional amount equal to the ``taxes imposed on the trust'' (as defined in Sec. 1.665(d)-1) for such preceding taxable year is likewise deemed distributed under section 661(a)(2). For example, a trust has taxable income of $11,032 (not including any capital gains) and undistributed net income of $8,000 for the taxable year 1954. The taxes imposed on the trust are $3,032. During the taxable year 1955, an accumulation distribution of $8,000 is made to the beneficiary, which is deemed under Sec. 1.666(a)-1 to have been distributed on the last day of 1954. The taxes imposed on the trust for 1954 of $3,032 are also deemed to have been distributed on the last day of 1954 since the 1955 accumulation distribution is not less than the 1954 undistributed net income. Thus, a total of $11,032 will be deemed to have been distributed on the last day of 1954 because of the accumulation distribution of $8,000 made in 1955.

(b) For the purpose of paragraph (a) of this section, the undistributed net income of any preceding taxable year is computed without regard to the accumulation distribution of the taxable year or any taxable year following such taxable year. However, any accumulation distribution of taxable years intervening between such preceding taxable year and the taxable year are taken into account. See paragraph (d) of Sec. 1.666(a)-1 and paragraphs (f)(5) and (g)(1) of Sec. 1.668(b)-2. [T.D. 6500, 25 FR 11814, Nov. 26, 1960, as amended by T.D. 6989, 34 FR 741, Jan. 17, 1969] Sec. 1.666(c)-1 Pro rata portion of taxes deemed distributed.

(a) If an accumulation distribution is deemed under Sec. 1.666(a)-1 to be distributed on the last day of a preceding taxable year and the amount is less than the undistributed net income for such preceding taxable year, then an additional amount is likewise deemed distributed under section 661(a)(2). The additional amount is equal to the taxes imposed on the trust, as defined in Sec. 1.665(d)-1, for such preceding taxable year, multiplied by the fraction of which the numerator is the amount of the accumulation distribution and the denominator is the undistributed net income for such preceding taxable year. See paragraph (b) of example 1 and paragraphs (c) and (f) of example 2 in Sec. 1.666(c)-2, and paragraph (f)(2) of Sec. 1.668(b)-2 for illustrations of this paragraph.

(b) For the purpose of paragraph (a) of this section, the undistributed net income of any preceding taxable year is computed without regard to the accumulation distribution of the taxable year or any taxable year following the taxable year. However, accumulation distributions of any taxable years intervening between such preceding taxable year and the taxable year are taken into account. See paragraph (d) of Sec. 1.666(a)-1, paragraph (c) of example 1 and paragraphs (e) and (h) of example 2 in Sec. 1.666(c)-2 and paragraph (f)(5)(iii) of Sec. 1.668(b)-2. [T.D. 6500, 25 FR 11814, Nov. 26, 1960, as amended by T.D. 6989, 34 FR 741, Jan. 17, 1969] Sec. 1.666(c)-2 Illustration of the provisions of section 666.

The application of the provisions of Sec. Sec. 1.666(a)-1, 1.666(b)-1, and 1.666(c)-1 may be illustrated by the following examples:

(a) A trust makes accumulation distributions as follows:

1959.............................................................$7,000

1960.............................................................25,000 For 1954 through 1958, the undistributed portion of distributable net income taxes imposed on the trust, and undistributed net income are as follows: ----------------------------------------------------------------------------------------------------------------

Undistributed

portion of Taxes Undistributed

Year distributable imposed on net income

net income the trust----------------------------------------------------------------------------------------------------------------1958............................................................... $12,100 $3,400 $8,7001957............................................................... 16,100 5,200 10,9001956............................................................... 6,100 1,360 4,7401955............................................................... None None None1954............................................................... 10,100 2,640 7,460----------------------------------------------------------------------------------------------------------------

(b) Since the entire amount of the accumulation distribution for 1959 ($7,000), determined without regard to the accumulation distribution for 1960, is less than the undistributed net income for 1958 ($8,700), an additional amount of $2,736 (7,000/ 8,700x$3,400) is likewise deemed distributed under section 666(c).

(c) In allocating the accumulation distribution for 1960, the undistributed net income for 1958 will take into account the accumulation distribution for 1959, and the additional amount of taxes imposed on the trust for 1958 deemed distributed. The undistributed net income for 1958 will then be $1,906; and the taxes imposed on the trust for 1958 will then be $458, determined as follows: Undistributed portion of distributable net income as of the $12,100

close of 1958...............................................Less:

Accumulation distribution (1959)................ $7,000

Taxes deemed distributed under section 666(c) 2,736

(7,000/8,700x$3,400)...........................

-----------

9,736

------------

Balance (undistributed portion of distributable net 2,364

income as of the close of 1959).........................Less: Personal exemption..................................... 100

------------

Balance.................................................. 2,264Taxes imposed on the trust (income taxes on $2,264).......... 458

------------Undistributed portion of distributable net income as of the 2,364

close of 1959...............................................Less: Income taxes attributable thereto...................... 458

------------

Undistributed net income for 1958 as of the close of 1959 1,906

(d) The accumulation distribution of $25,000 for 1960 is deemed to have been made on the last day of the 5 preceding taxable years of the trust to the extent of $17,546, the total of the undistributed net income for such years, as shown in the tabulation below. In addition, $7,018, the total taxes imposed on the trust for such years is also deemed to have been distributed on the last day of such years, as shown below: ------------------------------------------------------------------------

Undistributed Taxes imposed on

Year net income the trust------------------------------------------------------------------------1959................................ None None1958................................ $1,906 $4581957................................ 10,900 5,2001956................................ 4,740 1,3601955................................ None None------------------------------------------------------------------------

(e) No portion of the 1960 accumulation distribution is deemed made on the last day of 1954 because, as to 1960, 1954 is the sixth preceding taxable year.

(a) Under the terms of a trust instrument, the trustee has discretion to accumulate or distribute the income to X and to invade corpus for the benefit of X. The entire income of the trust is from royalties. Both X and the trust report on the calendar year basis. All of the income for 1954 was accumulated. The distributable net income of the trust for the taxable year 1954 is $20,100 and the income taxes paid by the trust for 1954 with respect to its distributable net income are $7,260. All of the income for 1955 and 1956 was distributed and in addition the trustee made accumulation distributions within the meaning of section 665(b) of $6,420 for each year.

(b) The undistributed net income of the trust determined under section 665(a) as of the close of 1954, is $12,840, computed as follows: Distributable net income.................................... $20,100Less: Taxes imposed on the trust............................ 7,260

-----------

Undistributed net income as of the close of 1954........ 12,840

(c) The accumulation distribution of $6,420 made during the taxable year 1955 is deemed under section 666(a) to have been made on December 31, 1954. Since this accumulation distribution is less than the 1954 undistributed net income of $12,840, a portion of the taxes imposed on the trust for 1954 is also deemed under section 666(c) to have been distributed on December 31, 1954. The total amount deemed to have been distributed to X on December 31, 1954, is $10,050, computed as follows: Accumulation distribution................................... $6,420Taxes deemed distributed (6,420/ 12,840x$7,260)............. 3,630

-----------

Total................................................... 10,050

(d) After the application of the provisions of subpart D (section 665 and following), part I, subchapter J, chapter 1 of the Code, to the accumulation distribution of 1955, the undistributed portion of the distributable net income of the trust for 1954, is $10,050, and the taxes imposed with respect thereto are $2,623, computed as follows: Distributable net income as of the close of 1954............ $20,100Less: 1955 accumulation distribution and taxes deemed 10,050

distributed on December 31, 1954 (paragraph (c) of this

example)...................................................

-----------

Undistributed portion of the 1954 distributable net 10,050

income adjusted as of the close of 1955................Less: Personal exemption.................................... 100

-----------

Balance................................................. 9,950Income taxes on $9,950...................................... 2,623

(e) The undistributed net income of the trust for the taxable year 1954, as adjusted to give effect to the 1955 accumulation distribution, is $7,427, computed as follows: Undistributed portion of distributable net income as of the $10,050

close of 1955..............................................Less: Income taxes applicable thereto....................... 2,623

-----------

Undistributed net income determined as of the close of 7,427

1955...................................................

(f) Inasmuch as all of the income of the trust for the taxable year 1955 was distributed to X, the trust had no undistributed net income for that year. Accordingly, the accumulation distribution of $6,420 made during the taxable year 1956 is, under section 666(a), deemed a distribution to X on December 31, 1954, within the meaning of section 661(a)(2). Since this accumulation distribution is less than the 1954 adjusted undistributed net income of $7,427, the trust is deemed under section 666(c) also to have distributed on December 31, 1954, a portion of the taxes imposed on the trust for 1954. The total amount deemed to be distributed on December 31, 1954, with respect to the accumulation distribution made in 1956, is $8,687, computed as follows: Accumulation distribution................................... $6,420Taxes deemed distributed (6,420/ 7,427x$2,623).............. 2,267

-----------

Total................................................... 8,687

(g) After the application of the provisions of subpart D to the accumulation distribution of 1956, the undistributed portion of the distributable net income of the trust for 1954, is $1,363, and the taxes imposed on the trust with respect thereto are $253, computed as follows: Undistributed portion of distributable net income as of the $10,050

close of 1955..............................................Less: 1956 accumulation distribution and taxes deemed 8,687

distributed on December 31, 1954 (paragraph (f) of this

example)...................................................

-----------

Undistributed portion of distributable net income as of 1,363

the close of 1956......................................Less: Personal exemption.................................... 100

-----------

Balance................................................. 1,263Income taxes on $1,263...................................... 253

(h) The undistributed net income of the trust for the taxable year 1954, determined as of the close of the taxable year 1956, is $1,110 ($1,363 less $253).