---

26 C.F.R. PART 1--INCOME TAXES

TITLE 26--Internal Revenue

CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY

SUBCHAPTER A--INCOME TAX

PART 1--INCOME TAXES

Table of Contents

Headings

�1.641

[Reserved]

�1.641(a)-0

Scope of subchapter J.

�1.641(a)-1

Imposition of tax; application of tax.

�1.641(a)-2

Gross income of estates and trusts.

�1.641(b)-1

Computation and payment of tax; deductions and credits of estates and trusts.

�1.641(b)-2

Filing of returns and payment of the tax.

�1.641(b)-3

Termination of estates and trusts.

�1.641(c)-0

Table of contents.

�1.641(c)-1

Electing small business trust.

�1.642(a)(1)-1

Partially tax-exempt interest.

�1.642(a)(2)-1

Foreign taxes.

�1.642(a)(3)-1

Dividends received by an estate or trust.

�1.642(a)(3)-2

Time of receipt of dividends by beneficiary.

�1.642(a)(3)-3

Cross reference.

�1.642(b)-1

Deduction for personal exemption.

�1.642(c)-0

Effective dates.

�1.642(c)-1

Unlimited deduction for amounts paid for a charitable purpose.

�1.642(c)-2

Unlimited deduction for amounts permanently set aside for a charitable purpose.

�1.642(c)-3

Adjustments and other special rules for determining unlimited charitable contributions deduction.

�1.642(c)-4

Nonexempt private foundations.

�1.642(c)-5

Definition of pooled income fund.

�1.642(c)-6

Valuation of a remainder interest in property transferred to a pooled income fund.

�1.642(c)-7

Transitional rules with respect to pooled income funds.

�1.642(d)-1

Net operating loss deduction.

�1.642(e)-1

Depreciation and depletion.

�1.642(f)-1

Amortization deductions.

�1.642(g)-1

Disallowance of double deductions; in general.

�1.642(g)-2

Deductions included.

�1.642(h)-1

Unused loss carryovers on termination of an estate or trust.

�1.642(h)-2

Excess deductions on termination of an estate or trust.

�1.642(h)-3

Meaning of ''beneficiaries succeeding to the property of the estate or trust''.

�1.642(h)-4

Allocation.

�1.642(h)-5

Example.

�1.642(i)-1

Certain distributions by cemetery perpetual care funds.

�1.642(i)-2

Definitions.

�1.643(a)-0

Distributable net income; deduction for distributions; in general.

�1.643(a)-1

Deduction for distributions.

�1.643(a)-2

Deduction for personal exemption.

�1.643(a)-3

Capital gains and losses.

�1.643(a)-4

Extraordinary dividends and taxable stock dividends.

�1.643(a)-5

Tax-exempt interest.

�1.643(a)-6

Income of foreign trust.

�1.643(a)-7

Dividends.

�1.643(a)-8

Certain distributions by charitable remainder trusts.

�1.643(b)-1

Definition of income.

�1.643(b)-2

Dividends allocated to corpus.

�1.643(c)-1

Definition of ''beneficiary''.

�1.643(d)-1

Definition of ''foreign trust created by a United States person''.

�1.643(d)-2

Illustration of the provisions of section 643.

�1.643(h)-1

Distributions by certain foreign trusts through intermediaries.

�1.642(c)-6a

Valuation of charitable remainder interests for which the valuation date is before May 1, 1999.

�1.645-1

Election by certain revocable trusts to be treated as part of estate.

�1.651(a)-1

Simple trusts; deduction for distributions; in general.

�1.651(a)-2

Income required to be distributed currently.

�1.651(a)-3

Distribution of amounts other than income.

�1.651(a)-4

Charitable purposes.

�1.651(a)-5

Estates.

�1.651(b)-1

Deduction for distributions to beneficiaries.

�1.652(a)-1

Simple trusts; inclusion of amounts in income of beneficiaries.

�1.652(a)-2

Distributions in excess of distributable net income.

�1.652(b)-1

Character of amounts.

�1.652(b)-2

Allocation of income items.

�1.652(b)-3

Allocation of deductions.

�1.652(c)-1

Different taxable years.

�1.652(c)-2

Death of individual beneficiaries.

�1.652(c)-3

Termination of existence of other beneficiaries.

�1.652(c)-4

Illustration of the provisions of sections 651 and 652.

�1.661(a)-1

Estates and trusts accumulating income or distributing corpus; general.

�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 contributions are made.

�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 estates and complex trusts; general.

�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 made.

�1.662(b)-2

Character of amounts; when charitable contributions are made.

�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; exclusions; gifts, bequests, etc.

�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 estates; in general.

�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 qualified revocable trusts.

�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 interest in a charitable remainder unitrust.

�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 foreign trusts; in general.

�1.665(b)-2

Exclusions from accumulation distributions in the case of trusts (other than a foreign trust created by a U.S. person).

�1.665(b)-3

Exclusions under section 663(a)(1).

�1.665(c)-1

Accumulation distributions of certain foreign trusts; in general.

�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.

�1.666(a)-1a

Amount allocated.

�1.666(b)-1a

Total taxes deemed distributed.

�1.666(c)-1a

Pro rata portion of taxes deemed distributed.

�1.666(c)-2a

Illustration of the provisions of section 666 (a), (b), and (c).

�1.666(d)-1a

Information required from trusts.

�1.666(a)-1

Amount allocated.

�1.666(b)-1

Total taxes deemed distributed.

�1.666(c)-1

Pro rata portion of taxes deemed distributed.

�1.666(c)-2

Illustration of the provisions of section 666.

�1.667-1

Denial of refund to trusts.

�1.667(a)-1a

Denial of refund to trusts.

�1.667(b)-1a

Authorization of credit to beneficiary for taxes imposed on the trust.

�1.668(a)-1a

Amounts treated as received in prior taxable years; inclusion in gross income.

�1.668(a)-2a

Allocation among beneficiaries; in general.

�1.668(a)-3a

Determination of tax.

�1.668(b)-1a

Tax on distribution.

�1.668(b)-2a

Special rules applicable to section 668.

�1.668(b)-3a

Computation of the beneficiary's income and tax for a prior taxable year.

�1.668(b)-4a

Information requirements with respect to beneficiary.

�1.668(a)-1

Amounts treated as received in prior taxable years; inclusion in gross income.

�1.668(a)-2

Allocation among beneficiaries; in general.

�1.668(a)-3

Excluded amounts.

�1.668(a)-4

Tax attributable to throwback.

�1.668(b)-1

Credit for taxes paid by the trust.

�1.668(b)-2

Illustration of the provisions of subpart D.

�1.669(a)-1a

Amount allocated.

�1.669(b)-1a

Tax on distribution.

�1.669(c)-1a

Special rules applicable to section 669.

�1.669(c)-2a

Computation of the beneficiary's income and tax for a prior taxable year.

�1.669(c)-3a

Information requirements with respect to beneficiary.

�1.669(d)-1a

Total taxes deemed distributed.

�1.669(e)-1a

Pro rata portion of taxes deemed distributed.

�1.669(e)-2a

Illustration of the provisions of section 669.

�1.669(f)-1a

Character of capital gain.

�1.669(f)-2a

Exception for capital gain distributions from certain trusts.

�1.669(a)-1

Limitation on tax.

�1.669(a)-2

Rules applicable to section 669 computations.

�1.669(a)-3

Tax computed by the exact throwback method.

�1.669(a)-4

Tax attributable to short-cut throwback method.

�1.669(b)-1

Information requirements.

�1.669(b)-2

Manner of exercising election.

�1.664-4a

Valuation of charitable remainder interests for which the valuation date is before May 1, 1999.

�1.665(a)-0a

Excess distributions by trusts; scope of subpart D.

�1.665(a)-1a

Undistributed net income.

�1.665(b)-1a

Accumulation distributions.

�1.665(b)-2a

Special rules for accumulation distributions made in taxable years beginning before January 1, 1974.

�1.665(c)-1a

Special rule applicable to distributions by certain foreign trusts.

�1.665(d)-1a

Taxes imposed on the trust.

�1.665(e)-1a

Preceding taxable year.

�1.665(f)-1a

Undistributed capital gain.

�1.665(g)-1a

Capital gain distribution.

�1.665(g)-2a

Application of separate share rule.

�1.671-1

Grantors and others treated as substantial owners; scope.

�1.671-2

Applicable principles.

�1.671-3

Attribution or inclusion of income, deductions, and credits against tax.

�1.671-4

Method of reporting.

�1.671-5

Reporting for widely held fixed investment trusts.

�1.671-5t

Reporting for widely held fixed investment trusts (temporary).

�1.672(a)-1

Definition of adverse party.

�1.672(b)-1

Nonadverse party.

�1.672(c)-1

Related or subordinate party.

�1.672(d)-1

Power subject to condition precedent.

�1.672(f)-1

Foreign persons not treated as owners.

�1.672(f)-2

Certain foreign corporations.

�1.672(f)-3

Exceptions to general rule.

�1.672(f)-4

Recharacterization of purported gifts.

�1.672(f)-5

Special rules.

�1.673(a)-1

Reversionary interests; income payable to beneficiaries other than certain charitable organizations; general rule.

�1.673(b)-1

Income payable to charitable beneficiaries before amendment by Tax Reform Act of 1969).

�1.673(c)-1

Reversionary interest after income beneficiary's death.

�1.673(d)-1

Postponement of date specified for reacquisition.

�1.674(a)-1

Power to control beneficial enjoyment; scope of section 674.

�1.674(b)-1

Excepted powers exercisable by any person.

�1.674(c)-1

Excepted powers exercisable only by independent trustees.

�1.674(d)-1

Excepted powers exercisable by any trustee other than grantor or spouse.

�1.674(d)-2

Limitations on exceptions in section 674 (b), (c), and (d).

�1.675-1

Administrative powers.

�1.676(a)-1

Power to revest title to portion of trust property in grantor; general rule.

�1.676(b)-1

Powers exercisable only after a period of time.

�1.677(a)-1

Income for benefit of grantor; general rule.

�1.677(b)-1

Trusts for support.

�1.678(a)-1

Person other than grantor treated as substantial owner; general rule.

�1.678(b)-1

If grantor is treated as the owner.

�1.678(c)-1

Trusts for support.

�1.678(d)-1

Renunciation of power.

�1.679-0

Outline of major topics.

�1.679-1

U.S. transferor treated as owner of foreign trust.

�1.679-2

Trusts treated as having a U.S. beneficiary.

�1.679-3

Transfers.

�1.679-4

Exceptions to general rule.

�1.679-5

Pre-immigration trusts.

�1.679-6

Outbound migrations of domestic trusts.

�1.679-7

Effective dates.

�1.681(a)-1

Limitation on charitable contributions deductions of trusts; scope of section 681.

�1.681(a)-2

Limitation on charitable contributions deduction of trusts with trade or business income.

�1.681(b)-1

Cross reference.

�1.682(a)-1

Income of trust in case of divorce, etc.

�1.682(b)-1

Application of trust rules to alimony payments.

�1.682(c)-1

Definitions.

�1.683-1

Applicability of provisions; general rule.

�1.683-2

Exceptions.

�1.683-3

Application of the 65-day rule of the Internal Revenue Code of 1939.

�1.684-1

Recognition of gain on transfers to certain foreign trusts and estates.

�1.684-2

Transfers.

�1.684-3

Exceptions to general rule of gain recognition.

�1.684-4

Outbound migrations of domestic trusts.

�1.684-5

Effective date.

�1.691(a)-1

Income in respect of a decedent.

�1.691(a)-2

Inclusion in gross income by recipients.

�1.691(a)-3

Character of gross income.

�1.691(a)-4

Transfer of right to income in respect of a decedent.

�1.691(a)-5

Installment obligations acquired from decedent.

�1.691(b)-1

Allowance of deductions and credit in respect to decedents.

�1.691(c)-1

Deduction for estate tax attributable to income in respect of a decedent.

�1.691(c)-2

Estates and trusts.

�1.691(d)-1

Amounts received by surviving annuitant under joint and survivor annuity contract.

�1.691(e)-1

Installment obligations transmitted at death when prior law applied.

�1.691(f)-1

Cross reference.

�1.692-1

Abatement of income taxes of certain members of the Armed Forces of the United States upon death.

�1.701-1

Partners, not partnership, subject to tax.

�1.701-2

Anti-abuse rule.

�1.702-1

Income and credits of partner.

�1.702-2

Net operating loss deduction of partner.

�1.702-3t

4-Year spread (temporary).

�1.703-1

Partnership computations.

�1.704-1

Partner's distributive share.

�1.704-1t

Partner's distributive share (temporary).

�1.704-2

Allocations attributable to nonrecourse liabilities.

�1.704-3

Contributed property.

�1.704-4

Distribution of contributed property.

�1.705-1

Determination of basis of partner's interest.

�1.705-2

Basis adjustments coordinating sections 705 and 1032.

�1.706-1

Taxable years of partner and partnership.

�1.706-2t

Temporary regulations; question and answer under the Tax Reform Act of 1984.

�1.707-0

Table of contents.

�1.707-1

Transactions between partner and partnership.

�1.707-2

Disguised payments for services.--[Reserved]

�1.707-3

Disguised sales of property to partnership; general rules.

�1.707-4

Disguised sales of property to partnership; special rules applicable to guaranteed payments, preferred returns, operating cash flow distributions, and reimbursements of preformation expenditures.

�1.707-5

Disguised sales of property to partnership; special rules relating to liabilities.

�1.707-6

Disguised sales of property by partnership to partner; general rules.

�1.707-7

Disguised sales of partnership interests.--[Reserved]

�1.707-8

Disclosure of certain information.

�1.707-9

Effective dates and transitional rules.

�1.708-1

Continuation of partnership.

�1.709-1

Treatment of organization and syndication costs.

�1.709-2

Definitions.

�1.721-1

Nonrecognition of gain or loss on contribution.

�1.722-1

Basis of contributing partner's interest.

�1.723-1

Basis of property contributed to partnership.

�1.731-1

Extent of recognition of gain or loss on distribution.

�1.731-2

Partnership distributions of marketable securities.

�1.732-1

Basis of distributed property other than money.

�1.732-2

Special partnership basis of distributed property.

�1.732-3

Corresponding adjustment to basis of assets of a distributed corporation controlled by a corporate partner.

�1.733-1

Basis of distributee partner's interest.

�1.734-1

Optional adjustment to basis of undistributed partnership property.

�1.734-2

Adjustment after distribution to transferee partner.

�1.735-1

Character of gain or loss on disposition of distributed property.

�1.736-1

Payments to a retiring partner or a deceased partner's successor in interest.

�1.737-1

Recognition of precontribution gain.

�1.737-2

Exceptions and special rules.

�1.737-3

Basis adjustments; Recovery rules.

�1.737-4

Anti-abuse rule.

�1.737-5

Effective dates.

�1.741-1

Recognition and character of gain or loss on sale or exchange.

�1.742-1

Basis of transferee partner's interest.

�1.743-1

Optional adjustment to basis of partnership property.

�1.751-1

Unrealized receivables and inventory items.

�1.752-0

Table of contents.

�1.752-1

Treatment of partnership liabilities.

�1.752-2

Partner's share of resource liabilities.

�1.752-3

Partner's share of nonrecourse liabilities.

�1.752-4

Special rules.

�1.752-5

Effective dates and transition rules.

�1.752-6

Partnership assumption of partner's section 358(h)(3) liability after October 18, 1999, and before June 24, 2003.

�1.752-7

Partnership assumption of partner's 1.752-7 liability on or after June 24, 2003.

�1.753-1

Partner receiving income in respect of decedent.

�1.754-1

Time and manner of making election to adjust basis of partnership property.

�1.755-1

Rules for allocation of basis.

�1.761-1

Terms defined.

�1.761-2

Exclusion of certain unincorporated organizations from the application of all or part of subchapter K of chapter 1 of the Internal Revenue Code.

�1.771-1

Effective date.

�1.801-1

Definitions.

�1.801-2

Taxable years affected.

�1.801-3

Definitions.

�1.801-4

Life insurance reserves.

�1.801-5

Total reserves.

�1.801-6

Adjustments in reserves for policy loans.

�1.801-7

Variable annuities.

�1.801-8

Contracts with reserves based on segregated asset accounts.

�1.802(b)-1

Tax on life insurance companies.

�1.802-2

Taxable years affected.

�1.802-3

Tax imposed on life insurance companies.

�1.802-4

Life insurance company taxable income.

�1.802-5

Special rule for 1959 and 1960.

�1.803-1

Life insurance reserves.

�1.803-2

Adjusted reserves.

�1.803-3

Interest paid or accrued.

�1.803-4

Taxable income and deductions.

�1.803-5

Real estate owned and occupied.

�1.803-6

Amortization of premium and accrual of discount.

�1.803-7

Taxable years affected.

�1.804-3

Gross investment income of a life insurance company.

�1.804-4

Investment yield of a life insurance company.

�1.806-1

Adjustment for certain reserves.

�1.806-2

Taxable years affected.

�1.806-3

Certain changes in reserves and assets.

�1.806-4

Change of basis in computing reserves.

�1.807-1

Mortality and morbidity tables.

�1.807-2

Cross-reference.

�1.809-1

Taxable years affected.

�1.809-2

Exclusion of share of investment yield set aside for policyholders.

�1.809-3

Gain and loss from operations defined.

�1.809-4

Gross amount.

�1.809-5

Deductions.

�1.809-6

Modifications.

�1.809-7

Limitation on certain deductions.

�1.809-8

Limitation on deductions for certain mutualization distributions.

�1.809-9

Computation of the differential earnings rate and the recomputed differential earnings rate.

�1.809-10

Computation of equity base.

�1.810-1

Taxable years affected.

�1.810-2

Rules for certain reserves.

�1.810-3

Adjustment for change in computing reserves.

�1.810-4

Certain decreases in reserves of voluntary employees' beneficiary associations.

�1.811-1

Taxable years affected.

�1.811-2

Dividends to policyholders.

�1.811-3

Cross-reference.

�1.812-1

Taxable years affected.

�1.812-2

Operations loss deduction.

�1.812-3

Computation of loss from operations.

�1.812-4

Operations loss carrybacks and operations loss carryovers.

�1.812-5

Offset.

�1.812-6

New company defined.

�1.812-7

Application of subtitle A and subtitle F.

�1.812-8

Illustration of operations loss carrybacks and carryovers.

�1.812-9

Cross-reference.

�1.815-1

Taxable years affected.

�1.815-2

Distributions to shareholders.

�1.815-3

Shareholders surplus account.

�1.815-4

Policyholders surplus account.

�1.815-5

Other accounts defined.

�1.815-6

Special rules.

�1.817-1

Taxable years affected.

�1.817-2

Treatment of capital gains and losses.

�1.817-3

Gain on property held on December 31, 1958, and certain substituted property acquired after 1958.

�1.817-4

Special rules.

�1.817-5

Diversification requirements for variable annuity, endowment, and life insurance contracts.

�1.817a-0

Table of contents.

�1.817a-1

Certain modified guaranteed contracts.

�1.818-1

Taxable years affected.

�1.818-2

Accounting provisions.

�1.818-3

Amortization of premium and accrual of discount.

�1.818-4

Election with respect to life insurance reserves computed on preliminary term basis.

�1.818-5

Short taxable years.

�1.818-6

Transitional rule for change in method of accounting.

�1.818-7

Denial of double deductions.

�1.818-8

Special rules relating to consolidated returns and certain capital losses.

�1.819-1

Taxable years affected.

�1.819-2

Foreign life insurance companies.

�1.821-1

Tax on mutual insurance companies other than life or marine or fire insurance companies subject to the tax imposed by section 831.

�1.821-2

Taxable years affected.

�1.821-3

Tax on mutual insurance companies other than life or marine or fire insurance companies subject to the tax imposed by section 831.

�1.821-4

Tax on mutual insurance companies other than life insurance companies and other than fire, flood, or marine insurance companies, subject to tax imposed by section 831.

�1.821-5

Special transitional underwriting loss.

�1.822-1

Taxable income and deductions.

�1.822-2

Real estate owned and occupied.

�1.822-3

Amortization of premium and accrual of discount.

�1.822-4

Taxable years affected.

�1.822-5

Mutual insurance company taxable income.

�1.822-6

Real estate owned and occupied.

�1.822-7

Amortization of premium and accrual of discount.

�1.822-8

Determination of taxable investment income.

�1.822-9

Real estate owned and occupied.

�1.822-10

Amortization of premium and accrual of discount.

�1.822-11

Net premiums.

�1.822-12

Dividends to policyholders.

�1.823-1

Net premiums.

�1.823-2

Dividends to policyholders.

�1.823-3

Taxable years affected.

�1.823-4

Net premiums.

�1.823-5

Dividends to policyholders.

�1.823-6

Determination of statutory underwriting income or loss.

�1.823-7

Subscribers of reciprocal underwriters and interinsurers.

�1.823-8

Special transitional underwriting loss; cross reference.

�1.825-1

Unused loss deduction; in general.

�1.825-2

Unused loss carryovers and carrybacks.

�1.825-3

Examples.

�1.826-1

Election by reciprocal underwriters and interinsurers.

�1.826-2

Special rules applicable to electing reciprocals.

�1.826-3

Attorney-in-fact of electing reciprocals.

�1.826-4

Allocation of expenses.

�1.826-5

Attribution of tax.

�1.826-6

Credit or refund.

�1.826-7

Examples.

�1.831-1

Tax on insurance companies (other than life or mutual), mutual marine insurance companies, and mutual fire insurance companies issuing perpetual policies.

�1.831-2

Taxable years affected.

�1.831-3

Tax on insurance companies (other than life or mutual), mutual marine insurance companies, mutual fire insurance companies issuing perpetual policies, and mutual fire or flood insurance companies operating on the basis of premium deposits; taxable years beginning after December 31, 1962.

�1.831-4

Election of multiple line companies to be taxed on total income.

�1.832-1

Gross income.

�1.832-2

Deductions.

�1.832-3

Taxable years affected.

�1.832-4

Gross income.

�1.832-5

Deductions.

�1.832-6

Policyholders of mutual fire or flood insurance companies operating on the basis of premium deposits.

�1.832-7t

Treatment of salvage and reinsurance in computing ''losses incurred'' deduction, taxable years beginning before January 1, 1990 (temporary).

�1.846-0

Outline of provisions.

�1.846-1

Application of discount factors.

�1.846-2

Election by taxpayer to use its own historical loss payment pattern.

�1.846-2t

Election by taxpayer to use its own historical loss payment pattern (temporary).

�1.846-3

Fresh start and reserve strengthening.

�1.846-4

Effective dates.

�1.846-4t

Effective dates (temporary).

�1.848-0

Outline of regulations under section 848.

�1.848-1

Definitions and special provisions.

�1.848-2

Determination of net premiums.

�1.848-3

Interim rules for certain reinsurance agreements.

��1.849-1.850

[Reserved]