(a) The provisions of section 643 may be illustrated by the following example:
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 |
(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.
[T.D. 6500, 25 FR 11814, Nov. 26, 1960. Redesignated, T.D. 6989, 34 FR 732, Jan. 1, 1969]