26 U.S.C. § 666 — Accumulation distribution allocated to pre-

Page 1839 TITLE 26—INTERNAL REVENUE CODE § 666 tain foreign trusts’’ for ‘‘Accumulation distribution’’ in heading, and inserted ‘‘in the case of a trust (other than a foreign trust created by a United States per- son),’’ after ‘‘purposes of this subpart,’’. Subsecs. (c) to (e). Pub. L. 87–834, § 7(b)(2), added sub- sec. (c) and redesignated former subsecs. (c) and (d) as (d) and (e), respectively. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1997 AMENDMENT Pub. L. 105–34, title V, § 507(c)(1), Aug. 5, 1997, 111 Stat. 857, provided that: ‘‘The amendments made by sub- section (a) [amending this section] shall apply to dis- tributions in taxable years beginning after the date of the enactment of this Act [Aug. 5, 1997].’’ EFFECTIVE DATE OF 1996 AMENDMENT Amendment by Pub. L. 104–188 effective Aug. 20, 1996, with exception for certain trusts, see section 1904(d) of Pub. L. 104–188, set out as a note under section 643 of this title. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99–514 effective, except as oth- erwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99–514, set out as a note under section 48 of this title. EFFECTIVE DATE OF 1978 AMENDMENT Pub. L. 95–600, title VII, § 701(q)(3)(A), Nov. 6, 1978, 92 Stat. 2910, provided that: ‘‘The amendments made by paragraph (1) [amending this section and section 667 of this title] shall apply to distributions made in taxable years beginning after December 31, 1975.’’ EFFECTIVE DATE OF 1976 AMENDMENT Amendment by section 701(b), (c), (d)(2), (3) of Pub. L. 94–455 applicable to distributions made in taxable years beginning after Dec. 31, 1975, see section 701(h), set out as a note under section 667 of this title. EFFECTIVE DATE OF 1971 AMENDMENT Pub. L. 92–178, title III, § 306(a), Dec. 10, 1971, 85 Stat. 524, provided that the amendment made by that section is effective with respect to taxable years beginning after Dec. 31, 1968. EFFECTIVE DATE OF 1969 AMENDMENT Pub. L. 91–172, title III, § 331(d), Dec. 30, 1969, 83 Stat. 598, as amended by Pub. L. 92–178, title III, § 306(b), Dec. 10, 1971, 85 Stat. 524; Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ‘‘(1) GENERAL RULE.—Except as otherwise provided in this subsection, the amendments made by this section [amending this section and sections 663, 666 to 669, and 6401 of this title] shall apply to taxable years beginning after December 31, 1968. ‘‘(2) EXCEPTIONS.— ‘‘(A) Amounts paid, credited, or required to be dis- tributed by a trust (other than a foreign trust created by a United States person) on or before the last day of a taxable year of the trust beginning before Janu- ary 1, 1974, shall not be deemed to be accumulation distributions to the extent that such amounts were accumulated by a trust in taxable years of such trust beginning before January 1, 1969, and would have been excepted from the definition of an accumulation dis- tribution by reason of paragraph (1), (2), (3), or (4) of section 665(b) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], as in effect on December 31, 1968, if they had been distributed on the last day of the last taxable year of the trust beginning before January 1, 1969. ‘‘(B) For taxable years of a trust beginning before January 1, 1970, the first sentence of section 666(a) of the Internal Revenue Code of 1986 (as amended by this section) shall not apply, and the amount of the accu- mulation distribution of the trust for such taxable years shall be deemed to be an amount within the meaning of paragraph (2) of section 661(a) distributed on the last day of each of the preceding taxable years to the extent that such amount exceeds the total of any undistributed net income for any taxable years intervening between the taxable year with respect of which the accumulation distribution is determined and such preceding taxable year. ‘‘(C) In the case of a trust which was in existence on December 31, 1969, section 669 of the Internal Revenue Code of 1986, as amended by this section, shall not apply to capital gain distributions made to a bene- ficiary before January 1, 1973. If the beneficiary re- ceives capital gain distributions from more than one such trust before January 1, 1973, the preceding sen- tence shall apply to capital gain distributions from only one such trust, such one to be designated by the taxpayer in accordance with regulations prescribed by the Secretary or his delegate. For purposes of the preceding sentence, capital gain distributions re- ceived from a trust qualifying under section 2056(b)(5) of the Internal Revenue Code of 1986 by a surviving spouse (who is the beneficiary of only one such trust) shall be disregarded.’’ EFFECTIVE DATE OF 1962 AMENDMENT Amendment of section by Pub. L. 87–834 applicable with respect to distributions made after Dec. 31, 1962, see section 7(j) of Pub. L. 87–834, set out as a note under section 643 of this title. SAVINGS PROVISION For provisions that nothing in amendment by Pub. L. 101–508 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liabil- ity for tax for periods ending after Nov. 5, 1990, see sec- tion 11821(b) of Pub. L. 101–508, set out as a note under section 45K of this title. PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989 For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title. § 666. Accumulation distribution allocated to pre- ceding years (a) Amount allocated In the case of a trust which is subject to sub- part C, the amount of the accumulation dis- tribution of such trust for a taxable year shall be deemed to be an amount within the meaning of paragraph (2) of section 661(a) distributed on the last day of each of the preceding taxable years, commencing with the earliest of such years, to the extent that such amount exceeds the total of any undistributed net income for all earlier preceding taxable years. The amount deemed to be distributed in any such preceding taxable year under the preceding sentence shall not exceed the undistributed net income for such preceding taxable year. For purposes of this subsection, undistributed net income for each of such preceding taxable years shall be computed without regard to such accumulation distribution and without regard to any accumu- lation distribution determined for any suc- ceeding taxable year. Page 1840 TITLE 26—INTERNAL REVENUE CODE § 666 (b) Total taxes deemed distributed If any portion of an accumulation distribution for any taxable year is deemed under subsection (a) to be an amount within the meaning of para- graph (2) of section 661(a) distributed on the last day of any preceding taxable year, and such por- tion of such distribution is not less than the un- distributed net income for such preceding tax- able year, the trust shall be deemed to have dis- tributed on the last day of such preceding tax- able year an additional amount within the meaning of paragraph (2) of section 661(a). Such additional amount shall be equal to the taxes (other than the tax imposed by section 55) im- posed on the trust for such preceding taxable year attributable to the undistributed net in- come. For purposes of this subsection, the undis- tributed net income and the taxes imposed on the trust for such preceding taxable year attrib- utable to such undistributed net income shall be computed without regard to such accumulation distribution and without regard to any accumu- lation distribution determined for any suc- ceeding taxable year. (c) Pro rata portion of taxes deemed distributed If any portion of an accumulation distribution for any taxable year is deemed under subsection (a) to be an amount within the meaning of para- graph (2) of section 661(a) distributed on the last day of any preceding taxable year and such por- tion of the accumulation distribution is less than the undistributed net income for such pre- ceding taxable year, the trust shall be deemed to have distributed on the last day of such pre- ceding taxable year an additional amount with- in the meaning of paragraph (2) of section 661(a). Such additional amount shall be equal to the taxes (other than the tax imposed by section 55) imposed on the trust for such taxable year at- tributable to the undistributed net income mul- tiplied by the ratio of the portion of the accu- mulation distribution to the undistributed net income of the trust for such year. For purposes of this subsection, the undistributed net income and the taxes imposed on the trust for such pre- ceding taxable year attributable to such undis- tributed net income shall be computed without regard to the accumulation distribution and without regard to any accumulation distribu- tion determined for any succeeding taxable year. (d) Rule when information is not available If adequate records are not available to deter- mine the proper application of this subpart to an amount distributed by a trust, such amount shall be deemed to be an accumulation distribu- tion consisting of undistributed net income earned during the earliest preceding taxable year of the trust in which it can be established that the trust was in existence. (e) Denial of refund to trusts and beneficiaries No refund or credit shall be allowed to a trust or a beneficiary of such trust for any preceding taxable year by reason of a distribution deemed to have been made by such trust in such year under this section. (Aug. 16, 1954, ch. 736, 68A Stat. 224; Pub. L. 87–834, § 7(c), Oct. 16, 1962, 76 Stat. 986; Pub. L. 91–172, title III, § 331(a), Dec. 30, 1969, 83 Stat. 593; Pub. L. 94–455, title VII, § 701(a)(2), Oct. 4, 1976, 90 Stat. 1577; Pub. L. 95–600, title IV, § 421(d), Nov. 6, 1978, 92 Stat. 2875; Pub. L. 96–222, title I, § 104(a)(4)(H)(vi), Apr. 1, 1980, 94 Stat. 218.) Editorial Notes AMENDMENTS 1980—Subsec. (c). Pub. L. 96–222 inserted ‘‘(other than the tax imposed by section 55)’’ after ‘‘equal to the taxes’’. 1978—Subsec. (b). Pub. L. 95–600 inserted ‘‘(other than the tax imposed by section 55)’’ after ‘‘equal to the taxes’’. 1976—Subsec. (e). Pub. L. 94–455 added subsec. (e). 1969—Subsec. (a). Pub. L. 91–172 substituted in first sentence ‘‘In the case of a trust which is subject to sub- part (C)’’ for ‘‘In the case of a trust (other than a for- eign trust created by a United States person) which for a taxable year beginning after December 31, 1953, is sub- ject to subpart (C)’’, ‘‘for a taxable year’’ for ‘‘for such taxable year’’, and ‘‘undistributed net income for all earlier preceding taxable years’’ for ‘‘undistributed net incomes for any taxable years intervening between the taxable year with respect to which the accumulation distribution is determined and such preceding taxable year’’ and in second sentence ‘‘for such’’ for ‘‘of such’’, inserted in first sentence ‘‘, commencing with the ear- liest of such years,’’ after ‘‘preceding taxable years’’, struck out ‘‘5’’ before ‘‘preceding taxable years’’ in first and third sentences and last sentence which read as fol- lows: ‘‘In the case of a foreign trust created by a United States person, this subsection shall apply to the pre- ceding taxable years of the trust without regard to any provision of the preceding sentences which would (but for this sentence) limit its application to the 5 pre- ceding taxable years.’’ Subsec. (b). Pub. L. 91–172 inserted ‘‘attributable to the undistributed net income’’ after ‘‘taxable year’’ in second sentence and ‘‘attributable to such undistrib- uted net income’’ before ‘‘shall be computed’’ in third sentence. Subsec. (c). Pub. L. 91–172 inserted ‘‘attributable to the undistributed net income’’ before ‘‘multiplied by the ratio’’ in second sentence and ‘‘attributable to such undistributed net income’’ before ‘‘shall be computed’’ in third sentence. Subsec. (d). Pub. L. 91–172 added subsec. (d). 1962—Subsec. (a). Pub. L. 87–834 inserted ‘‘(other than a foreign trust created by a United States person)’’ after ‘‘In the case of a trust’’, and inserted sentence making this subsection applicable, in the case of a for- eign trust created by a United States person, to the preceding taxable years of the trust without regard to any provision of the preceding sentences of this sub- section which would (but for this sentence) limit its ap- plication to the 5 preceding taxable years. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1980 AMENDMENT Amendment by Pub. L. 96–222 effective, except as oth- erwise provided, as if it had been included in the provi- sions of the Revenue Act of 1978, Pub. L. 95–600, to which such amendment relates, see section 201 of Pub. L. 96–222, set out as a note under section 32 of this title. EFFECTIVE DATE OF 1978 AMENDMENT Amendment by Pub. L. 95–600 applicable to taxable years beginning after Dec. 31, 1978, see section 421(g) of Pub. L. 95–600, set out as a note under section 5 of this title. EFFECTIVE DATE OF 1976 AMENDMENT Amendment by Pub. L. 94–455 applicable to distribu- tions made in taxable years beginning after Dec. 31, 1975, see section 701(h) of Pub. L. 94–455, set out as a note under section 667 of this title. Page 1841 TITLE 26—INTERNAL REVENUE CODE § 667 EFFECTIVE DATE OF 1969 AMENDMENT Amendment by Pub. L. 91–172 applicable to taxable years beginning after Dec. 31, 1968, except that for tax- able years of a trust beginning before Jan. 1, 1970, first sentence of subsec. (a) not applicable and amount of ac- cumulation distribution stated, see section 331(d)(1), (2)(B) of Pub. L. 91–172, set out as a note under section 665 of this title. EFFECTIVE DATE OF 1962 AMENDMENT Amendment by Pub. L. 87–834 applicable with respect to distributions made after Dec. 31, 1962, see section 7(j) of Pub. L. 87–834, set out as a note under section 643 of this title. § 667. Treatment of amounts deemed distributed by trust in preceding years (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 in- cluded in the income of a beneficiary of the trust when paid, credited, or required to be dis- tributed to the extent that such total would have been included in the income of such bene- ficiary 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 in- come shall be determined only as provided in this section and shall consist of the sum of— (1) a partial tax computed on the taxable in- come reduced by an amount equal to the total of such amounts, at the rate and in the man- ner 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 pre- ceding taxable years of the trust on the last day of which an amount is deemed under sec- tion 666(a) to have been distributed, (B) by taking from the 5 taxable years im- mediately preceding the year of the accumu- lation 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 re- maining after the application of subpara- graph (B) an amount determined by dividing the amount deemed distributed under sec- tion 666 and required to be included in in- come 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 sub- paragraph (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 in- crease in tax determined under subparagraph (D), multiplied by the number of preceding taxable years determined under subparagraph (A), over the amount of taxes (other than the amount of taxes described in section 665(d)(2)) deemed distributed to the beneficiary under sections 666(b) and (c). (2) Treatment of loss years For purposes of paragraph (1), the taxable in- come of the beneficiary for any taxable year shall be deemed to be not 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 dis- tributed 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 666(a), the number of preceding taxable years of the trust with respect to which an amount is deemed distributed to a beneficiary under section 666(a) shall be deter- mined without regard to such year. (4) Effect of other accumulation distributions In computing the partial tax under para- graph (1) for any beneficiary, the income of such beneficiary for each of his prior taxable years shall include amounts previously deemed distributed to such beneficiary in such year under section 666 as a result of prior ac- cumulation distributions (whether from the same or another trust). (5) Multiple distributions in the same taxable year In the case of accumulation distributions made from more than one trust which are in- cludible in the income of a beneficiary in the same taxable year, the distributions shall be deemed to have been made consecutively in whichever order the beneficiary shall deter- mine. (6) Adjustment in partial tax for estate and generation-skipping transfer taxes attrib- utable to partial tax (A) In general The partial tax shall be reduced by an amount which is equal to the pre-death por- tion of the partial tax multiplied by a frac- tion— (i) the numerator of which is that por- tion of the tax imposed by chapter 11 or 13, as the case may be, which is attributable (on a proportionate basis) to amounts in- cluded in the accumulation distribution, and (ii) the denominator of which is the amount of the accumulation distribution which is subject to the tax imposed by chapter 11 or 13, as the case may be. (B) Partial tax determined without regard to this paragraph For purposes of this paragraph, the term ‘‘partial tax’’ means the partial tax imposed by subsection (a)(2) determined under this subsection without regard to this paragraph.