26 CFR 1.642(h)-2 - Excess deductions on termination of an estate or trust.

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§ 1.642(h)-2 Excess deductions on termination of an estate or trust.
(a) If, on the termination of an estate or trust, the estate or trust has for its last taxable year deductions (other than the deductions allowed under section 642(b) (relating to personal exemption) or section 642(c) (relating to charitable contributions)) in excess of gross income, the excess is allowed under section 642(h)(2) as a deduction to the beneficiaries succeeding to the property of the estate or trust. The deduction is allowed only in computing taxable income and must be taken into account in computing the items of tax preference of the beneficiary; it is not allowed in computing adjusted gross income. The deduction is allowable only in the taxable year of the beneficiary in which or with which the estate or trust terminates, whether the year of termination of the estate or trust is of normal duration or is a short taxable year. For example: Assume that a trust distributes all of its assets to B and terminates on December 31, 1954. As of that date it has excess deductions, for example, because of corpus commissions on termination, of $18,000. B, who reported on the calendar year basis, could claim the $18,000 as a deduction for the taxable year 1954. However, if the deduction (when added to his other deductions) exceeds his gross income, the excess may not be carried over to the year 1955 or subsequent years.
(b) A deduction based upon a net operating loss carryover will never be allowed to beneficiaries under both paragraphs (1) and (2) of section 642(h). Accordingly, a net operating loss deduction which is allowable to beneficiaries succeeding to the property of the estate or trust under the provisions of paragraph (1) of section 642(h) cannot also be considered a deduction for purposes of paragraph (2) of section 642(h)and paragraph (a) of this section. However, if the last taxable year of the estate or trust is the last year in which a deduction on account of a net operating loss may be taken, the deduction, to the extent not absorbed in that taxable year by the estate or trust, is considered an “excess deduction” under section 642(h)(2) and paragraph (a) of this section.
(c) Any item of income or deduction, or any part thereof, which is taken into account in determining the net operating loss or capital loss carryover of the estate or trust for its last taxable year shall not be taken into account again in determining excess deductions on termination of the trust or estate within the meaning of section 642(h)(2) and paragraph (a) of this section (see example in § 1.642(h)-5).
[T.D. 6500, 25 FR 11814, Nov. 26, 1960, as amended by T.D. 7564, 43 FR 40495, Sept. 12, 1978]

Title 26 published on 2014-04-01

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  • 2014-09-19; vol. 79 # 182 - Friday, September 19, 2014
    1. 79 FR 56442 - Additional Rules Regarding Hybrid Retirement Plans
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      DEPARTMENT OF THE TREASURY, Internal Revenue Service
      Final regulations.
      Effective Date: These regulations are effective on September 19, 2014. Applicability Date: These regulations generally apply to plan years that begin on or after January 1, 2016. However, see the “Effective/Applicability Dates” section in this preamble for additional information regarding the applicability of these regulations.
      26 CFR Part 1

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Title 26 published on 2014-04-01

The following are ALL rules, proposed rules, and notices (chronologically) published in the Federal Register relating to 26 CFR 1 after this date.

  • 2014-09-19; vol. 79 # 182 - Friday, September 19, 2014
    1. 79 FR 56305 - Transitional Amendments To Satisfy the Market Rate of Return Rules for Hybrid Retirement Plans
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      DEPARTMENT OF THE TREASURY, Internal Revenue Service
      Notice of proposed rulemaking and notice of public hearing.
      Written or electronic comments must be received by December 18, 2014. Outlines of topics to be discussed at the public hearing scheduled for January 9, 2015, at 10 a.m. must be received by December 18, 2014.
      26 CFR Part 1