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26 U.S.C. § 584 — Common trust funds
Federal law — U.S. Code and appendices · legal_authorities
**(a) Definitions** For purposes of this subtitle, the term “common trust fund” means a fund maintained by a bank—
(1) exclusively for the collective investment and reinvestment of moneys contributed thereto by the bank in its capacity—
(A) as a trustee, executor, administrator, or guardian, or
(B) as a custodian of accounts—
(i) which the Secretary determines are established pursuant to a State law which is substantially similar to the Uniform Gifts to Minors Act as published by the American Law Institute, and
(ii) with respect to which the bank establishes, to the satisfaction of the Secretary, that it has duties and responsibilities similar to duties and responsibilities of a trustee or guardian; and
(2) in conformity with the rules and regulations, prevailing from time to time, of the Board of Governors of the Federal Reserve System or the Comptroller of the Currency pertaining to the collective investment of trust funds by national banks.
For purposes of this subsection, two or more banks which are members of the same affiliated group (within the meaning of section 1504) shall be treated as one bank for the period of affiliation with respect to any fund of which any of the member banks is trustee or two or more of the member banks are cotrustees.
**(b) Taxation of common trust funds** A common trust fund shall not be subject to taxation under this chapter and for purposes of this chapter shall not be considered a corporation.
**(c) Income of participants in fund** Each participant in the common trust fund in computing its taxable income shall include, whether or not distributed and whether or not distributable—
(1) as part of its gains and losses from sales or exchanges of capital assets held for not more than 1 year, its proportionate share of
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**(a) Definitions** For purposes of this subtitle, the term “common trust fund” means a fund maintained by a bank—
(1) exclusively for the collective investment and reinvestment of moneys contributed thereto by the bank in its capacity—
(A) as a trustee, executor, administrator, or guardian, or
(B) as a custodian of accounts—
(i) which the Secretary determines are established pursuant to a State law which is substantially similar to the Uniform Gifts to Minors Act as published by the American Law Institute, and
(ii) with respect to which the bank establishes, to the satisfaction of the Secretary, that it has duties and responsibilities similar to duties and responsibilities of a trustee or guardian; and
(2) in conformity with the rules and regulations, prevailing from time to time, of the Board of Governors of the Federal Reserve System or the Comptroller of the Currency pertaining to the collective investment of trust funds by national banks.
For purposes of this subsection, two or more banks which are members of the same affiliated group (within the meaning of section 1504) shall be treated as one bank for the period of affiliation with respect to any fund of which any of the member banks is trustee or two or more of the member banks are cotrustees.
**(b) Taxation of common trust funds** A common trust fund shall not be subject to taxation under this chapter and for purposes of this chapter shall not be considered a corporation.
**(c) Income of participants in fund** Each participant in the common trust fund in computing its taxable income shall include, whether or not distributed and whether or not distributable—
(1) as part of its gains and losses from sales or exchanges of capital assets held for not more than 1 year, its proportionate share of the gains and losses of the common trust fund from sales or exchanges of capital assets held for not more than 1 year,
(2) as part of its gains and losses from sales or exchanges of capital assets held for more than 1 year, its proportionate share of the gains and losses of the common trust fund from sales or exchanges of capital assets held for more than 1 year, and
(3) its proportionate share of the ordinary taxable income or the ordinary net loss of the common trust fund, computed as provided in subsection (d).
The proportionate share of each participant in the amount of dividends received by the common trust fund and to which section 1(h)(11) applies shall be considered for purposes of such paragraph as having been received by such participant.
**(d) Computation of common trust fund income** The taxable income of a common trust fund shall be computed in the same manner and on the same basis as in the case of an individual, except that—
(1) there shall be segregated the gains and losses from sales or exchanges of capital assets;
(2) after excluding all items of gain and loss from sales or exchanges of capital assets, there shall be computed—
(A) an ordinary taxable income which shall consist of the excess of the gross income over deductions; or
(B) an ordinary net loss which shall consist of the excess of the deductions over the gross income; and
(3) the deduction provided by section 170 (relating to charitable, etc., contributions and gifts) shall not be allowed.
**(e) Admission and withdrawal** No gain or loss shall be realized by the common trust fund by the admission or withdrawal of a participant. The admission of a participant shall be treated with respect to the participant as the purchase of, or an exchange for, the participating interest. The withdrawal of any participating interest by a participant shall be treated as a sale or exchange of such interest by the participant.
**(f) Different taxable years of common trust fund and participant** If the taxable year of the common trust fund is different from that of a participant, the inclusions with respect to the taxable income of the common trust fund, in computing the taxable income of the participant for its taxable year, shall be based upon the taxable income of the common trust fund for any taxable year of the common trust fund ending within or with the taxable year of the participant.
**(g) Net operating loss deduction** The benefit of the deduction for net operating losses provided by section 172 shall not be allowed to a common trust fund, but shall be allowed to the participants in the common trust fund under regulations prescribed by the Secretary.
**(h) Nonrecognition treatment for certain transfers to regulated investment companies**
(1) **In general** — If—
(A) a common trust fund transfers substantially all of its assets to one or more regulated investment companies in exchange solely for stock in the company or companies to which such assets are so transferred, and
(B) such stock is distributed by such common trust fund to participants in such common trust fund in exchange solely for their interests in such common trust fund,
no gain or loss shall be recognized by such common trust fund by reason of such transfer or distribution, and no gain or loss shall be recognized by any participant in such common trust fund by reason of such exchange.
(2) **Basis rules**
(A) *Regulated investment company* — The basis of any asset received by a regulated investment company in a transfer referred to in paragraph (1)(A) shall be the same as it would be in the hands of the common trust fund.
(B) *Participants* — The basis of the stock which is received in an exchange referred to in paragraph (1)(B) shall be the same as that of the property exchanged. If stock in more than one regulated investment company is received in such exchange, the basis determined under the preceding sentence shall be allocated among the stock in each such company on the basis of respective fair market values.
(3) **Treatment of assumptions of liability**
(A) *In general* — In determining whether the transfer referred to in paragraph (1)(A) is in exchange solely for stock in one or more regulated investment companies, the assumption by any such company of a liability of the common trust fund shall be disregarded.
(B) *Special rule where assumed liabilities exceed basis*
(i) *In general* — If, in any transfer referred to in paragraph (1)(A), the assumed liabilities exceed the aggregate adjusted bases (in the hands of the common trust fund) of the assets transferred to the regulated investment company or companies—
(I) notwithstanding paragraph (1), gain shall be recognized to the common trust fund on such transfer in an amount equal to such excess,
(II) the basis of the assets received by the regulated investment company or companies in such transfer shall be increased by the amount so recognized, and
(III) any adjustment to the basis of a participant’s interest in the common trust fund as a result of the gain so recognized shall be treated as occurring immediately before the exchange referred to in paragraph (1)(B).
If the transfer referred to in paragraph (1)(A) is to two or more regulated investment companies, the basis increase under subclause (II) shall be allocated among such companies on the basis of the respective fair market values of the assets received by each of such companies.
(ii) *Assumed liabilities* — For purposes of clause (i), the term “assumed liabilities” means any liability of the common trust fund assumed by any regulated investment company in connection with the transfer referred to in paragraph (1)(A).
(C) *Assumption* — For purposes of this paragraph, in determining the amount of any liability assumed, the rules of section 357(d) shall apply.
(4) **Common trust fund must meet diversification rules** — This subsection shall not apply to any common trust fund which would not meet the requirements of section 368(a)(2)(F)(ii) if it were a corporation. For purposes of the preceding sentence, Government securities shall not be treated as securities of an issuer in applying the 25-percent and 50-percent test and such securities shall not be excluded for purposes of determining total assets under clause (iv) of section 368(a)(2)(F).
**(i) Taxable year of common trust fund** For purposes of this subtitle, the taxable year of any common trust fund shall be the calendar year.
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Federal law — U.S. Code and appendices · legal_authorities
**(a) In general** Except as otherwise provided in this chapter, a distribution of property (as defined in section 317(a)) made by a corporation to a shareholder with respect to its stock shall be treated in the manner provided in subsection (c).
**(b) Amount distributed**
(1) **General rule** — For purposes of this section, the amount of any distribution shall be the amount of money received, plus the fair market value of the other property received.
(2) **Reduction for liabilities** — The amount of any distribution determined under paragraph (1) shall be reduced (but not below zero) by—
(A) the amount of any liability of the corporation assumed by the shareholder in connection with the distribution, and
(B) the amount of any liability to which the property received by the shareholder is subject immediately before, and immediately after, the distribution.
(3) **Determination of fair market value** — For purposes of this section, fair market value shall be determined as of the date of the distribution.
**(c) Amount taxable** In the case of a distribution to which subsection (a) applies—
(1) **Amount constituting dividend** — That portion of the distribution which is a dividend (as defined in section 316) shall be included in gross income.
(2) **Amount applied against basis** — That portion of the distribution which is not a dividend shall be applied against and reduce the adjusted basis of the stock.
(3) **Amount in excess of basis**
(A) *In general* — Except as provided in subparagraph (B), that portion of the distribution which is not a dividend, to the extent that it exceeds the adjusted basis of the stock, shall be treated as gain from the sale or exchange of property.
(B) *Distributions out of increase in value accrued before March 1, 1913* — Th
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Married individuals filing joint returns and surviving spouses** There is hereby imposed on the taxable income of—
(1) every married individual (as defined in section 7703) who makes a single return jointly with his spouse under section 6013, and
(2) every surviving spouse (as defined in section 2(a)),
a tax determined in accordance with the following table: If taxable income is:The tax is: Not over $36,90015% of taxable income. Over $36,900 but not over $89,150$5,535, plus 28% of the excess over $36,900. Over $89,150 but not over $140,000$20,165, plus 31% of the excess over $89,150. Over $140,000 but not over $250,000$35,928.50, plus 36% of the excess over $140,000. Over $250,000$75,528.50, plus 39.6% of the excess over $250,000.
**(b) Heads of households** There is hereby imposed on the taxable income of every head of a household (as defined in section 2(b)) a tax determined in accordance with the following table: If taxable income is:The tax is: Not over $29,60015% of taxable income. Over $29,600 but not over $76,400$4,440, plus 28% of the excess over $29,600. Over $76,400 but not over $127,500$17,544, plus 31% of the excess over $76,400. Over $127,500 but not over $250,000$33,385, plus 36% of the excess over $127,500. Over $250,000$77,485, plus 39.6% of the excess over $250,000.
**(c) Unmarried individuals (other than surviving spouses and heads of households)** There is hereby imposed on the taxable income of every individual (other than a surviving spouse as defined in section 2(a) or the head of a household as defined in section 2(b)) who is not a married individual (as defined in section 7703) a tax determined in accordance with the following table: If taxable income is:The tax is: Not over $22,10015% of taxable income. Over $22,100 but not over $53,50
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Definition of surviving spouse**
(1) **In general** — For purposes of section 1, the term “surviving spouse” means a taxpayer—
(A) whose spouse died during either of his two taxable years immediately preceding the taxable year, and
(B) who maintains as his home a household which constitutes for the taxable year the principal place of abode (as a member of such household) of a dependent (i) who (within the meaning of section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof) is a son, stepson, daughter, or stepdaughter of the taxpayer, and (ii) with respect to whom the taxpayer is entitled to a deduction for the taxable year under section 151.
(2) **Limitations** — Notwithstanding paragraph (1), for purposes of section 1 a taxpayer shall not be considered to be a surviving spouse—
(A) if the taxpayer has remarried at any time before the close of the taxable year, or
(B) unless, for the taxpayer’s taxable year during which his spouse died, a joint return could have been made under the provisions of section 6013 (without regard to subsection (a)(3) thereof).
(3) **Special rule where deceased spouse was in missing status** — If an individual was in a missing status (within the meaning of section 6013(f)(3)) as a result of service in a combat zone (as determined for purposes of section 112) and if such individual remains in such status until the date referred to in subparagraph (A) or (B), then, for purposes of paragraph (1)(A), the date on which such individual died shall be treated as the earlier of the date determined under subparagraph (A) or the date determined under subparagraph (B):
(A) the date on which the determination is made under [section 556 of title 37](https://uscode.house.gov/view.xhtml?req=granuleid:
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule** Except as provided in subsection (b), if property is transferred to a trust in exchange for an interest in other trust property and if the trust would be an investment company (within the meaning of section 351) if it were a corporation, then gain shall be recognized to the transferor.
**(b) Exception for pooled income funds** Subsection (a) shall not apply to any transfer to a pooled income fund (within the meaning of section 642(c)(5)).
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule**
(1) **Wholly worthless debts** — There shall be allowed as a deduction any debt which becomes worthless within the taxable year.
(2) **Partially worthless debts** — When satisfied that a debt is recoverable only in part, the Secretary may allow such debt, in an amount not in excess of the part charged off within the taxable year, as a deduction.
**(b) Amount of deduction** For purposes of subsection (a), the basis for determining the amount of the deduction for any bad debt shall be the adjusted basis provided in section 1011 for determining the loss from the sale or other disposition of property.
**(c) Repealed. Pub. L. 99–514, title VIII, § 805(a), Oct. 22, 1986, 100 Stat. 2361]**
**(d) Nonbusiness debts**
(1) **General rule** — In the case of a taxpayer other than a corporation—
(A) subsection (a) shall not apply to any nonbusiness debt; and
(B) where any nonbusiness debt becomes worthless within the taxable year, the loss resulting therefrom shall be considered a loss from the sale or exchange, during the taxable year, of a capital asset held for not more than 1 year.
(2) **Nonbusiness debt defined** — For purposes of paragraph (1), the term “nonbusiness debt” means a debt other than—
(A) a debt created or acquired (as the case may be) in connection with a trade or business of the taxpayer; or
(B) a debt the loss from the worthlessness of which is incurred in the taxpayer’s trade or business.
**(e) Worthless securities** This section shall not apply to a debt which is evidenced by a security as defined in section 165(g)(2)(C).
**(f) Cross references**
(1) For disallowance of deduction for worthlessness of debts owed by political parties and similar organizations, see section 271.
(2) For special rule for banks with respect
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule** No deduction shall be allowed for—
(1) **Expenses** — Any amount otherwise allowable as a deduction which is allocable to one or more classes of income other than interest (whether or not any amount of income of that class or classes is received or accrued) wholly exempt from the taxes imposed by this subtitle, or any amount otherwise allowable under section 212 (relating to expenses for production of income) which is allocable to interest (whether or not any amount of such interest is received or accrued) wholly exempt from the taxes imposed by this subtitle.
(2) **Interest** — Interest on indebtedness incurred or continued to purchase or carry obligations the interest on which is wholly exempt from the taxes imposed by this subtitle.
(3) **Certain regulated investment companies** — In the case of a regulated investment company which distributes during the taxable year an exempt-interest dividend (including exempt-interest dividends paid after the close of the taxable year as described in section 855), that portion of any amount otherwise allowable as a deduction which the amount of the income of such company wholly exempt from taxes under this subtitle bears to the total of such exempt income and its gross income (excluding from gross income, for this purpose, capital gain net income, as defined in section 1222(9)).
(4) **Interest related to exempt-interest dividends** — Interest on indebtedness incurred or continued to purchase or carry shares of stock of a regulated investment company which during the taxable year of the holder thereof distributes exempt-interest dividends.
(5) **Special rules for application of paragraph (2) in the case of short sales** — For purposes of paragraph (2)—
(A) *In general* — The term “interest” includes any
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule** For purposes of this subtitle, the taxable year of an S corporation shall be a permitted year.
**(b) Permitted year defined** For purposes of this section, the term “permitted year” means a taxable year which—
(1) is a year ending December 31, or
(2) is any other accounting period for which the corporation establishes a business purpose to the satisfaction of the Secretary.
For purposes of paragraph (2), any deferral of income to shareholders shall not be treated as a business purpose.
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule** In the case of a qualified individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 15 percent of such individual’s section 22 amount for such taxable year.
**(b) Qualified individual** For purposes of this section, the term “qualified individual” means any individual—
(1) who has attained age 65 before the close of the taxable year, or
(2) who retired on disability before the close of the taxable year and who, when he retired, was permanently and totally disabled.
**(c) Section 22 amount** For purposes of subsection (a)—
(1) **In general** — An individual’s section 22 amount for the taxable year shall be the applicable initial amount determined under paragraph (2), reduced as provided in paragraph (3) and in subsection (d).
(2) **Initial amount**
(A) *In general* — Except as provided in subparagraph (B), the initial amount shall be—
(i) $5,000 in the case of a single individual, or a joint return where only one spouse is a qualified individual,
(ii) $7,500 in the case of a joint return where both spouses are qualified individuals, or
(iii) $3,750 in the case of a married individual filing a separate return.
(B) *Limitation in case of individuals who have not attained age 65*
(i) *In general* — In the case of a qualified individual who has not attained age 65 before the close of the taxable year, except as provided in clause (ii), the initial amount shall not exceed the disability income for the taxable year.
(ii) *Special rules in case of joint return* — In the case of a joint return where both spouses are qualified individuals and at least one spouse has not attained age 65 before the close of the taxable year—
(I) if both spouses have
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule** No gain or loss shall be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock in such corporation and immediately after the exchange such person or persons are in control (as defined in section 368(c)) of the corporation.
**(b) Receipt of property** If subsection (a) would apply to an exchange but for the fact that there is received, in addition to the stock permitted to be received under subsection (a), other property or money, then—
(1) gain (if any) to such recipient shall be recognized, but not in excess of—
(A) the amount of money received, plus
(B) the fair market value of such other property received; and
(2) no loss to such recipient shall be recognized.
**(c) Special rules where distribution to shareholders**
(1) **In general** — In determining control for purposes of this section, the fact that any corporate transferor distributes part or all of the stock in the corporation which it receives in the exchange to its shareholders shall not be taken into account.
(2) **Special rule for section 355** — If the requirements of section 355 (or so much of section 356 as relates to section 355) are met with respect to a distribution described in paragraph (1), then, solely for purposes of determining the tax treatment of the transfers of property to the controlled corporation by the distributing corporation, the fact that the shareholders of the distributing corporation dispose of part or all of the distributed stock, or the fact that the corporation whose stock was distributed issues additional stock, shall not be taken into account in determining control for purposes of this section.
**(d) Services, certain indebtedness, and accrued interest not treated as property** For purposes o
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Federal law — U.S. Code and appendices · legal_authorities
Page 1777
TITLE 26—INTERNAL REVENUE CODE
§ 584
2004, to the extent that regular interests issued by the
FASIT before such date continue to remain out-
standing in accordance with the original terms of
issuance, see section 835(c) of Pub. L. 108–357, set out as
a note under section 56 of this title.
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by Pub. L. 104–188 effective Sept. 1, 1997,
see section 1621(d) of Pub. L. 104–188, set out as a note
under section 26 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100–647 effective, except as
otherwise provided, as if included in the provision of
the Tax Reform Act of 1986, Pub. L. 99–514, to which
such amendment relates, see section 1019(a) of Pub. L.
100–647, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 671(b)(4) of Pub. L. 99–514 ef-
fective Jan. 1, 1987, see section 675(a) of Pub. L. 99–514,
as amended, set out as an Effective Date note under
section 860A of this title.
Amendment by section 901(d)(3) of Pub. L. 99–514 ap-
plicable to taxable years beginning after Dec. 31, 1986,
see section 901(e) of Pub. L. 99–514, set out as a note
under section 166 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98–369 applicable to property
acquired after June 22, 1984, and before Jan. 1, 1988, see
section 1001(e) of Pub. L. 98–369, set out as a note under
section 166 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Pub. L. 94–455, title X, § 1044(b), Oct. 4, 1976, 90 Stat.
1643, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100
Stat. 2095, provided that:
‘‘(1) The amendment made by subsection (a) [amend-
ing this section] shall apply with respect to taxable
years beginning after July 11, 1969.
‘‘(2) If the
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