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26 U.S.C. § 668 — Interest charge on accumulation distributions from foreign trusts
Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule** For purposes of the tax determined under section 667(a)—
(1) **Interest determined using underpayment rates** — The interest charge determined under this section with respect to any distribution is the amount of interest which would be determined on the partial tax computed under section 667(b) for the period described in paragraph (2) using the rates and the method under section 6621 applicable to underpayments of tax.
(2) **Period** — For purposes of paragraph (1), the period described in this paragraph is the period which begins on the date which is the applicable number of years before the date of the distribution and which ends on the date of the distribution.
(3) **Applicable number of years** — For purposes of paragraph (2)—
(A) *In general* — The applicable number of years with respect to a distribution is the number determined by dividing—
(i) the sum of the products described in subparagraph (B) with respect to each undistributed income year, by
(ii) the aggregate undistributed net income.
The quotient determined under the preceding sentence shall be rounded under procedures prescribed by the Secretary.
(B) *Product described* — For purposes of subparagraph (A), the product described in this subparagraph with respect to any undistributed income year is the product of—
(i) the undistributed net income for such year, and
(ii) the sum of the number of taxable years between such year and the taxable year of the distribution (counting in each case the undistributed income year but not counting the taxable year of the distribution).
(4) **Undistributed income year** — For purposes of this subsection, the term “undistributed income year” means any prior taxable year of the trust for which there is undistributed n
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Source file: Laws/federal/codes/united-states-code/title-26/section-668-interest-charge-on-accumulation-distributions-from-foreign-trusts--ef2393e1e9.md
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Source location: Title 26, Chapter 1, § 668; chapter-001-normal-taxes-and-surtaxes.md
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**(a) General rule** For purposes of the tax determined under section 667(a)—
(1) **Interest determined using underpayment rates** — The interest charge determined under this section with respect to any distribution is the amount of interest which would be determined on the partial tax computed under section 667(b) for the period described in paragraph (2) using the rates and the method under section 6621 applicable to underpayments of tax.
(2) **Period** — For purposes of paragraph (1), the period described in this paragraph is the period which begins on the date which is the applicable number of years before the date of the distribution and which ends on the date of the distribution.
(3) **Applicable number of years** — For purposes of paragraph (2)—
(A) *In general* — The applicable number of years with respect to a distribution is the number determined by dividing—
(i) the sum of the products described in subparagraph (B) with respect to each undistributed income year, by
(ii) the aggregate undistributed net income.
The quotient determined under the preceding sentence shall be rounded under procedures prescribed by the Secretary.
(B) *Product described* — For purposes of subparagraph (A), the product described in this subparagraph with respect to any undistributed income year is the product of—
(i) the undistributed net income for such year, and
(ii) the sum of the number of taxable years between such year and the taxable year of the distribution (counting in each case the undistributed income year but not counting the taxable year of the distribution).
(4) **Undistributed income year** — For purposes of this subsection, the term “undistributed income year” means any prior taxable year of the trust for which there is undistributed net income, other than a taxable year during all of which the beneficiary receiving the distribution was not a citizen or resident of the United States.
(5) **Determination of undistributed net income** — Notwithstanding section 666, for purposes of this subsection, an accumulation distribution from the trust shall be treated as reducing proportionately the undistributed net income for undistributed income years.
(6) **Periods before 1996** — Interest for the portion of the period described in paragraph (2) which occurs before January 1, 1996, shall be determined—
(A) by using an interest rate of 6 percent, and
(B) without compounding until January 1, 1996.
**(b) Limitation** The total amount of the interest charge shall not, when added to the total partial tax computed under section 667(b), exceed the amount of the accumulation distribution (other than the amount of tax deemed distributed by section 666(b) or (c)) in respect of which such partial tax was determined.
**(c) Interest charge not deductible** The interest charge determined under this section shall not be allowed as a deduction for purposes of any tax imposed by this title.
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule** The total of the amounts which are treated under section 666 as having 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, at the rate and in the manner as if this section had not been enacted,
(2) a partial tax determined as provided in subsection (b) of this section, and
(3) in the case of a foreign trust, the interest charge determined as provided in section 668.
**(b) Tax on distribution**
(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 day of which an 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)
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 667
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Federal law — U.S. Code and appendices · legal_authorities
Page 1843
TITLE 26—INTERNAL REVENUE CODE
§ 668
deemed distributed by trust in preceding years for pro-
visions that no refund or credit be allowed to a trust
for any preceding taxable year by reason of a distribu-
tion deemed to have been made by such trust in such
year under section 666 or 669 and that there be allowed
as a credit against the tax imposed by this subtitle on
the beneficiary an amount equal to the amount of the
taxes deemed distributed to such beneficiary by the
trust under sections 666(b) and (c) and 669(d) and (e)
during preceding taxable years of the trust on the last
day of which the beneficiary was in being, reduced by
the amount of the taxes deemed distributed to such
beneficiary for such preceding taxable years to the ex-
tent that such taxes are taken into account under sec-
tions 668(b)(1) and 669(b) in determining the amount of
the tax imposed by section 668. See section 666(e) of this
title.
1969—Subsec. (a). Pub. L. 91–172 incorporated existing
provisions of first sentence in provisions designated as
subsec. (a), included distributions made under section
669 of this title, and struck out provisions for credit of
taxes imposed on the trust against tax of beneficiary.
See subsec. (b) of this section.
Subsec. (b). Pub. L. 91–172 incorporated provision of
first sentence for credit of taxes imposed on the trust
against tax of beneficiary, and provided for interest
free credit and method of computation of its amount.
The second sentence had provided that the amount of
taxes which may not be refunded or credited to the
trust shall be an amount equal to the excess of (1) the
taxes imposed on the trust for any preceding taxable
year (computed without regard to the accumulation
distribution for the taxable year) over (2) the
Source: Supplied 2024 U.S. Code historical extraction · 26 U.S.C. § 668
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