Federal regulations · Through 2026-08-25 · Newer source version available

26 CFR 1.643(d)-2: (d)-2 Illustration of the provisions of section 643.

(a) The provisions of section 643 may be illustrated by the following example:
Example.
(1) Under the terms of the trust instrument, the income of a trust is required to be currently distributed to W during her life. Capital gains are allocable to corpus and all expenses are charges against corpus. During the taxable year the trust has the following items of income and expenses:
Dividends from domestic corporations $30,000
Extraordinary dividends allocated to corpus by the trustee in good faith 20,000
Taxable interest 10,000
Tax-exempt interest 10,000
Long-term capital gains 10,000
Trustee's commissions and miscellaneous expenses allocable to corpus 5,000
(2) The “income” of the trust determined under section 643(b) which is currently distributable to W is $50,000, consisting of dividends of $30,000, taxable interest of $10,000, and tax-exempt interest of $10,000. The trustee's commissions and miscellaneous expenses allocable to tax-exempt interest amount to $1,000 (10,000/50,000 × $5,000).
(3) The “distributable net income” determined under section 643(a) amounts to $45,000, computed as follows:
Dividends from domestic corporations $30,000
Taxable interest 10,000
Nontaxable interest $10,000
Less: Expenses allocable thereto 1,000
9,000
Total 49,000
Less: Expenses ($5,000 less $1,000 allocable to tax-exempt interest) 4,000
Distributable net income 45,000
In determining the distributable net income of $45,000, the taxable income of the trust is computed with the following modifications: No deductions are allowed for distributions to W and for personal exemption of the trust (section 643(a) (1) and (2)); capital gains allocable to corpus are excluded and the deduction allowable under section 1202 is not taken into account (section 643(a)(3)): the extraordinary dividends allocated to corpus by the trustee in good faith are excluded (sections 643(a)(4)); and the tax- exempt interest (as adjusted for expenses) and the dividend exclusion of $50 are included) section 643(a) (5) and (7)).
(b) See paragraph (c) of the example in § 1.661(c)-2 for the computation of distributable net income where there is a charitable contributions deduction.

Where this section sits in the code

Title 26—Internal Revenue
CHAPTER I—INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY
SUBCHAPTER A—INCOME TAX
PART 1—INCOME TAXES

(a) The provisions of section 643 may be illustrated by the following example:

Example.

(1) Under the terms of the trust instrument, the income of a trust is required to be currently distributed to W during her life. Capital gains are allocable to corpus and all expenses are charges against corpus. During the taxable year the trust has the following items of income and expenses:

Dividends from domestic corporations $30,000

Extraordinary dividends allocated to corpus by the trustee in good faith 20,000

Taxable interest 10,000

Tax-exempt interest 10,000

Long-term capital gains 10,000

Trustee's commissions and miscellaneous expenses allocable to corpus 5,000

(2) The “income” of the trust determined under section 643(b) which is currently distributable to W is $50,000, consisting of dividends of $30,000, taxable interest of $10,000, and tax-exempt interest of $10,000. The trustee's commissions and miscellaneous expenses allocable to tax-exempt interest amount to $1,000 (10,000/50,000 × $5,000).

(3) The “distributable net income” determined under section 643(a) amounts to $45,000, computed as follows:

Dividends from domestic corporations $30,000

Taxable interest 10,000

Nontaxable interest $10,000

Less: Expenses allocable thereto 1,000

9,000

Total 49,000

Less: Expenses ($5,000 less $1,000 allocable to tax-exempt interest) 4,000

Distributable net income 45,000

In determining the distributable net income of $45,000, the taxable income of the trust is computed with the following modifications: No deductions are allowed for distributions to W and for personal exemption of the trust (section 643(a) (1) and (2)); capital gains allocable to corpus are excluded and the deduction allowable under section 1202 is not taken into account (section 643(a)(3)): the extraordinary dividends allocated to corpus by the trustee in good faith are excluded (sections 643(a)(4)); and the tax- exempt interest (as adjusted for expenses) and the dividend exclusion of $50 are included) section 643(a) (5) and (7)).

(b) See paragraph (c) of the example in § 1.661(c)-2 for the computation of distributable net income where there is a charitable contributions deduction.

Collected 2026-08-27T02:25:11Z. Source file · JSON

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