Page:United States Statutes at Large Volume 68A.djvu/272

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INTERNAL REVENUE CODE OF 19 54

(d) E F F E C T OF RENUNCIATION OR DISCLAIMER.—Subsection

(a)

shall not apply with respect to a power which has been renounced or disclaimed within a reasonable time after the holder of the power first became aware of its existence. Subpart F—Miscellaneous Sec. 681. Limitation on charitable deduction. Sec. 682. Income of an estate or trust in case of divorce, etc. Sec. 683. Applicability of provisions. SEC. 681. LIMITATION ON CHARITABLE DEDUCTION. (a) TRADE OR BUSINESS INCOME.—In computing the deduction

allowable under section 642(c) to a trust, no amount otherwise allowable under section 642(c) as a deduction shall be allowed as a deduction with respect to income of the taxable year which is allocable to its unrelated business income for such year. For purposes of the preceding sentence, the term "unrelated business income" means an amount equal to the amount which, if such trust were exempt from tax under section 501(a) by reason of section 501(c)(3), would be computed as its unrelated business taxable income under section 512 (relating to income derived from certain business activities and from certain leases). (b) OPERATIONS OF T R U S T S. — (1) LIMITATION ON CHARITABLE, ETC., DEDUCTION.—The amount

otherwise allowable under section 642(c) as a deduction shall not exceed 20 percent of the taxable income of the trust (computed without the benefit of section 642(c) b u t with the benefit of section 170 (b)(1)(A)) if the trust has engaged in a prohibited transaction, as defined in paragraph (2). (2) PROHIBITED TRANSACTIONS.—For purposes of this subsection, the term "prohibited transaction" means any transaction after July 1, 1950, in which any trust while holding income or corpus which has been permanently set aside or is to be used exclusively for charitable or other purposes described in section 642(c)— (A) lends any part of such income or corpus, without receipt of adequate security and a reasonable rate of interest, to; (B) pays any compensation from such income or corpus, in excess of a reasonable allowance for salaries or other compensation for personal services actually rendered, to; (C) makes any part of its services available on a preferential basis to; (D) uses such income or corpus to make any substantial purchase of securities or any other property, for more than an adequate consideration in money or money's worth, from; (E) sells any substantial part of the securities or other property comprising such income or corpus, for less than an adequate consideration in money or money's worth, to; or (F) engages in any other transaction which results in a substantial diversion of such income or corpus to; the creator of such trust; any person who has made a substantial contribution to such trust; a member of a family (as defined in section 267(c)(4)) of an individual who is the creator of the trust or who has made a substantial contribution to the trust; or a cor§ 678(d)

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