# Treas. Reg. § 1.643(d)-2: Illustration of the provisions of section 643.

Source: eCFR as of 2026-10-19 <https://www.ecfr.gov/current/title-26/section-1.643(d)-2>. Interprets 26 U.S.C. § 643.

(a) The provisions of section 643 may be illustrated by the following example: 

Example.

(1) Under the terms of the trust instrument, the income of a trust is required to be currently distributed to W during her life. Capital gains are allocable to corpus and all expenses are charges against corpus. During the taxable year the trust has the following items of income and expenses: 

|  |  |  |
| --- | --- | --- |
| Dividends from domestic corporations |  | $30,000 |
| Extraordinary dividends allocated to corpus by the trustee in good faith |  | 20,000 |
| Taxable interest |  | 10,000 |
| Tax-exempt interest |  | 10,000 |
| Long-term capital gains |  | 10,000 |
| Trustee's commissions and miscellaneous expenses allocable to corpus |  | 5,000 |

(2) The “income” of the trust determined under section 643(b) which is currently distributable to W is $50,000, consisting of dividends of $30,000, taxable interest of $10,000, and tax-exempt interest of $10,000. The trustee's commissions and miscellaneous expenses allocable to tax-exempt interest amount to $1,000 (10,000/50,000 × $5,000). 

(3) The “distributable net income” determined under section 643(a) amounts to $45,000, computed as follows: 

|  |  |  |
| --- | --- | --- |
| Dividends from domestic corporations |  | $30,000 |
| Taxable interest |  | 10,000 |
| Nontaxable interest | $10,000 |  |
| Less: Expenses allocable thereto | 1,000 |  |
|  |  | 9,000 |
| Total |  | 49,000 |
| Less: Expenses ($5,000 less $1,000 allocable to tax-exempt interest) |  | 4,000 |
| Distributable net income |  | 45,000 |

In determining the distributable net income of $45,000, the taxable income of the trust is computed with the following modifications: No deductions are allowed for distributions to W and for personal exemption of the trust (section 643(a) (1) and (2)); capital gains allocable to corpus are excluded and the deduction allowable under section 1202 is not taken into account (section 643(a)(3)): the extraordinary dividends allocated to corpus by the trustee in good faith are excluded (sections 643(a)(4)); and the tax- exempt interest (as adjusted for expenses) and the dividend exclusion of $50 are included) section 643(a) (5) and (7)).

(b) See paragraph (c) of the example in § 1.661(c)-2 for the computation of distributable net income where there is a charitable contributions deduction. 

[T.D. 6500, 25 FR 11814, Nov. 26, 1960. Redesignated, T.D. 6989, 34 FR 732, Jan. 1, 1969]