Treasury Regulations (26 C.F.R.)
26 CFR § 1.663(c)-1
Separate shares treated as separate trusts or as separate estates; in general.
# (a)
If a single trust (or estate) has more than one beneficiary, and if different beneficiaries have substantially separate and independent shares, their shares are treated as separate trusts (or estates) for the sole purpose of determining the amount of distributable net income allocable to the respective beneficiaries under sections 661 and 662. Application of this rule will be significant in, for example, situations in which income is accumulated for beneficiary A but a distribution is made to beneficiary B of both income and corpus in an amount exceeding the share of income that would be distributable to B had there been separate trusts (or estates). In the absence of a separate share rule B would be taxed on income which is accumulated for A. The division of distributable net income into separate shares will limit the tax liability of B. Section 663(c) does not affect the principles of applicable law in situations in which a single trust (or estate) instrument creates not one but several separate trusts (or estates), as opposed to separate shares in the same trust (or estate) within the meaning of this section.
# (b)
The separate share rule does not permit the treatment of separate shares as separate trusts (or estates) for any purpose other than the application of distributable net income. It does not, for instance, permit the treatment of separate shares as separate trusts (or estates) for purposes of:
(1) The filing of returns and payment of tax,
(2) The deduction of personal exemption under section 642(b), and
(3) The allowance to beneficiaries succeeding to the trust (or estate) property of excess deductions and unused net operating loss and capital loss carryovers on termination of the trust (or estate) under section 642(h).
# (c)
The separate share rule may be applicable even though separate and independent accounts are not maintained and are not required to be maintained for each share on the books of account of the trust (or estate), and even though no physical segregation of assets is made or required.
# (d)
Separate share treatment is not elective. Thus, if a trust (or estate) is properly treated as having separate and independent shares, such treatment must prevail in all taxable years of the trust (or estate) unless an event occurs as a result of which the terms of the trust (or estate) instrument and the requirements of proper administration require different treatment.
[T.D. 6500, 25 FR 11814, Nov. 26, 1960; 25 FR 14021, as amended by T.D. 8849, 64 FR 72543, Dec. 28, 1999]
Source: view the official text
In this part (40 sections)
- 1.661(a)-2 · Deduction for distributions to beneficiaries.
- 1.661(b)-1 · Character of amounts distributed; in general.
- 1.661(b)-2 · Character of amounts distributed when charitable…
- 1.661(c)-1 · Limitation on deduction.
- 1.661(c)-2 · Illustration of the provisions of section 661.
- 1.662(a)-1 · Inclusion of amounts in gross income of beneficiaries of…
- 1.662(a)-2 · Currently distributable income.
- 1.662(a)-3 · Other amounts distributed.
- 1.662(a)-4 · Amounts used in discharge of a legal obligation.
- 1.662(b)-1 · Character of amounts; when no charitable contributions are…
- 1.662(b)-2 · Character of amounts; when charitable contributions are…
- 1.662(c)-1 · Different taxable years.
- 1.662(c)-2 · Death of individual beneficiary.
- 1.662(c)-3 · Termination of existence of other beneficiaries.
- 1.662(c)-4 · Illustration of the provisions of sections 661 and 662.
- 1.663(a)-1 · Special rules applicable to sections 661 and 662;…
- 1.663(a)-2 · Charitable, etc., distributions.
- 1.663(a)-3 · Denial of double deduction.
- 1.663(b)-1 · Distributions in first 65 days of taxable year; scope.
- 1.663(b)-2 · Election.
- 1.663(c)-1 · Separate shares treated as separate trusts or as separate…
- 1.663(c)-2 · Rules of administration.
- 1.663(c)-3 · Applicability of separate share rule to certain trusts.
- 1.663(c)-4 · Applicability of separate share rule to estates and…
- 1.663(c)-5 · Examples.
- 1.663(c)-6 · Effective dates.
- 1.664-1 · Charitable remainder trusts.
- 1.664-2 · Charitable remainder annuity trust.
- 1.664-3 · Charitable remainder unitrust.
- 1.664-4 · Calculation of the fair market value of the remainder…
- 1.665(a)-0 · Excess distributions by trusts; scope of subpart D.
- 1.665(a)-1 · Undistributed net income.
- 1.665(b)-1 · Accumulation distributions of trusts other than certain…
- 1.665(b)-2 · Exclusions from accumulation distributions in the case of…
- 1.665(b)-3 · Exclusions under section 663(a)(1).
- 1.665(c)-1 · Accumulation distributions of certain foreign trusts; in…
- 1.665(c)-2 · Indirect payments to the beneficiary.
- 1.665(d)-1 · Taxes imposed on the trust.
- 1.665(e)-1 · Preceding taxable year.
- 1.665(e)-2 · Application of separate share rule.