§ 668 Interest charge on accumulation distributions from foreign trusts

OLRC 119-134 · eCFR 2026-10-19 · 13 regs · 2 amending Acts · cited by 2 sections

Enacted 1976 · Pub. L. 94-455 Amended · 2 Acts

197619901996(a) General rule(b) Limitation(c) Interest charge not deductible
Prior provisions 1
  • A prior section 668, acts Aug. 16, 1954, ch. 736, 68A Stat. 225; Oct. 16, 1962, Pub. L. 87–834, § 7(d), 76 Stat. 986; Dec. 30, 1969, Pub. L. 91–172, title III, § 331(a), 83 Stat. 594, related to treatment of amounts deemed distributed in preceding years, prior to repeal by Pub. L. 94–455, title VII, § 701(a)(3), Oct. 4, 1976, 90 Stat. 1577. See section 667 of this title.
Connections Cited by 2 · Cites 3
§ 668 Interest charge on accumulation distributions from foreign trusts

Cases: Furstenberg v. Commissioner, 83 T.C. 755 (1984)

Forms: Form 1041

(a) General rule For purposes of the tax determined under section 667(a)—

§ 1.668(a)-1A Amounts treated as received in prior taxable years; inclusion in gross income.§ 1.668(a)-2A Allocation among beneficiaries; in general.§ 1.668(a)-3A Determination of tax.§ 1.668(a)-1 Amounts treated as received in prior taxable years; inclusion in gross income.§ 1.668(a)-2 Allocation among beneficiaries; in general.§ 1.668(a)-3 Excluded amounts.§ 1.668(a)-4 Tax attributable to throwback.
Amended 1996
  • 1996 Pub. L. 104-188 Pub. L. 104–188 reenacted heading without change and amended text generally. Prior to amendment, text read as follows: “For purposes of the tax determined under section 667(a), the interest charge is an amount equal to 6 percent of the partial tax computed under section 667(b) multiplied by a fraction—

    “(1) the numerator of which is the sum of the number of taxable years between each taxable year to which the distribution is allocated under section 666(a) and the taxable year of the distribution (counting in each case the taxable year to which the distribution is allocated but not counting the taxable year of the distribution), and

    “(2) the denominator of which is the number of taxable years to which the distribution is allocated under section 666(a).”

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    (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.

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      (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.

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        (3) Applicable number of years For purposes of paragraph (2)—

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          (A) In general The applicable number of years with respect to a distribution is the number determined by dividing—

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            (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—

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              (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.

              § 1.668(b)-1A Tax on distribution.§ 1.668(b)-2A Special rules applicable to section 668.§ 1.668(b)-3A Computation of the beneficiary's income and tax for a prior taxable year.§ 1.668(b)-4A Information requirements with respect to beneficiary.§ 1.668(b)-1 Credit for taxes paid by the trust.§ 1.668(b)-2 Illustration of the provisions of subpart D.
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                (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.

                Amended 1990
                • 1990 Pub. L. 101-508 Pub. L. 101–508 substituted heading for one which read “Special rules” and amended text generally, restating provisions of former par. (1) as entire subsection and striking out former par. (2) which provided that for purposes of this section, undistributed net income existing in a trust as of January 1, 1977, would be treated as allocated under section 666(a) to the first taxable year beginning after December 31, 1976.