26 CFR § 1.667-1 - Denial of refund to trusts.
(a) If an amount is deemed under section 666 to be an amount paid, credited, or required to be distributed on the last day of a preceding taxable year, the trust is not allowed a refund or credit of the amount of “taxes imposed on the trust”, as defined in § 1.665(d)-1, which would not have been payable for the preceding taxable year had the trust in fact made such distribution on the last day of such year. However, such taxes are allowed as a credit under section 668(b) against the tax of the beneficiaries who are treated as having received the distributions in the preceding taxable year. The amount of taxes which may not be refunded or credited to the trust under this paragraph and which are allowed as a credit under section 668(b) against the tax of the beneficiaries, is an amount equal to the excess of:
(2) The amount of taxes for such preceding taxable year which would be imposed on the undistributed portion of distributable net income of the trust for such preceding taxable year after the application of subpart D (section 665 and following), part I, subchapter J, chapter 1 of the Code, on account of the accumulation distribution determined for the taxable year.
(b) Paragraph (a) of this section may be illustrated by the following examples:
|Accumulation distribution in 1955||$5,000|
|Taxes deemed distributed under section 666(c) (5,000/8,840 × $6,160)||3,484|
|Total amount deemed distributed out of the undistributed portion of distributable net income||8,484|
|Tax attributable to the undistributed portion of distributable net income ($15,000) before 1955 distribution (see example 1 of this paragraph)||6,160|
|Tax on $11,516 (taxable income of $20,000 minus $8,484, amount deemed distributed)||$3,216|
|Tax on $5,000 (capital gains of $5,100, less personal exemption of $100, allocable to corpus)||1,100|
|Tax attributable to undistributed portion of distributable net income after 1955 distribution||2,116|
|Refund disallowed to the trust and credit available to A in 1955||4,044|