The portion of the total amount includible in income under §1.668(a)-1A which is includible in the income of a particular beneficiary is based upon the ratio determined under the second sentence of section 662(a)(2) for the taxable year (and not for the preceding taxable year). This section may be illustrated by the following example:
(b) For the purposes of determining the amounts includible in the beneficiaries' gross income for 1975, the trust is deemed to have made the following distributions:
Amount distributed out of 1975 income (distributable net income) | $10,000 |
Accumulation distribution deemed distributed by the trust on the last day of 1973 under section 666(a) | 5,000 |
Taxes imposed on the trust attributable to the undistributed net income deemed distributed under section 666(b) | 1,100 |
(d) B will include in his income for 1975 one-third of each item shown in paragraph (b) of this example, computed in the manner shown in paragraph (c) of this example.
(e) To the extent the total accumulation distribution consists of undistributed net income and undistributed capital gain, A and B shall be treated as receiving a pro rata share of each for the preceding taxable year 1973.
[T.D. 7204, 37 FR 17148, Aug. 25, 1972]