Page:United States Statutes at Large Volume 90 Part 2.djvu/108

 90 STAT. 1576 26 USC 667.

PUBLIC LAW 94-455—OCT. 4, 1976

"SEC. 667. TREATMENT OF AMOUNTS DEEMED DISTRIBUTED BY TRUST IN PRECEDING YEARS. " (a) GENERAL, RULE. — The total of the amounts which a r e treated under section 666 as havinjr been distributed by a trust in a preceding taxable year shall be included in the income of a beneficiary of the trust when paid, credited, or required to be distributed to the extent that such total would have been included in the income of such beneficiary under section 662(a)(2) (and, with respect to any tax-exempt interest to which section 103 applies, under section 662(b)) if such total had been paid to such beneficiary on the last day of such preceding taxable year. The tax imposed by this subtitle on a beneficiary for a taxable year in which any such amount is included in his income shall be determined only as provided in this section and shall consist of the sum of— " (1) a partial tax computed on the taxable income reduced by an amount equal to the total of such amounts, a t the rate and in the manner as if this section h a d not been enacted, and " (2) a partial tax determined as provided in subsection (b) of this section. "(b)

T A X ON DiSTKiBUTiON.—

" (1) IN GENERAL.—The partial tax imposed by subsection (a) (2) shall be determined— " (A) by determining the number of preceding taxable years of the trust on the last d a y of which a n amount is deemed under section 666(a) to have been distributed, " (B) by taking from the 5 taxable years immediately preceding the year of the accumulation distribution the 1 taxable year for which the beneficiary's taxable income was the highest and the 1 taxable year for which his taxable income was the lowest, " (C) by adding to the beneficiary's taxable income for each of the 3 taxable years remaining after the application of subparagraph (B) an amount determined by dividing the amount deemed distributed under section 666 and required to be included in income under subsection (a) by the number of preceding taxable years determined under subparagraph (A), and " (D) by determining the average increase in tax for the 3 taxable years referred to in subparagraph (C) resulting from the application of such subparagraph. The partial tax imposed by subsection (a)(2) shall be the excess (if any) of the average increase in tax determined under subparagraph (D), multiplied by the number of preceding taxable years determined under subparagraph (A), over the amount of taxes deemed distributed to the beneficiary under sections 666(b) and (c). " (2) TREATMENT o r LOSS YEARS.—For purposes of

paragraph

(1), the taxable income of the beneficiary for any taxable year shall be deemed not to be less than zero. "(3)

CERTAIN

PRECEDING TAXABLE YEARS NOT TAKEN

INTO

ACCOUNT.—For purposes of paragraph (1), if the amount of the undistributed net income deemed distributed in any preceding taxable year of the trust is less than 25 percent of the amount of the accumulation distribution divided by the number of preceding taxable years to which the accumulation distribution is allocated under section 6 6 6 (a), the number of preceding taxable years of

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