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Sec. 641. Imposition Of Tax

I.R.C. § 641(a) Application Of Tax
The tax imposed by section 1(e) shall apply to the taxable income of estates or of any kind of property held in trust, including—
I.R.C. § 641(a)(1)
income accumulated in trust for the benefit of unborn or unascertained persons or persons with contingent interests, and income accumulated or held for future distribution under the terms of the will or trust;
I.R.C. § 641(a)(2)
income which is to be distributed currently by the fiduciary to the beneficiaries, and income collected by a guardian of an infant which is to be held or distributed as the court may direct;
I.R.C. § 641(a)(3)
income received by estates of deceased persons during the period of administration or settlement of the estate; and
I.R.C. § 641(a)(4)
income which, in the discretion of the fiduciary, may be either distributed to the beneficiaries or accumulated.
I.R.C. § 641(b) Computation And Payment
The taxable income of an estate or trust shall be computed in the same manner as in the case of an individual, except as otherwise provided in this part. The tax shall be computed on such taxable income and shall be paid by the fiduciary. For purposes of this subsection, a foreign trust or foreign estate shall be treated as a nonresident alien individual who is not present in the United States at any time.
I.R.C. § 641(c) Special Rules For Taxation Of Electing Small Business Trusts
I.R.C. § 641(c)(1) In General
For purposes of this chapter—
I.R.C. § 641(c)(1)(A)
the portion of any electing small business trust which consists of stock in 1 or more S corporations shall be treated as a separate trust, and
I.R.C. § 641(c)(1)(B)
the amount of the tax imposed by this chapter on such separate trust shall be determined with the modifications of paragraph (2).
I.R.C. § 641(c)(2) Modifications
For purposes of paragraph (1), the modifications of this paragraph are the following:
I.R.C. § 641(c)(2)(A)
Except as provided in section 1(h), the amount of the tax imposed by section 1(e) shall be determined by using the highest rate of tax set forth in section 1(e).
I.R.C. § 641(c)(2)(B)
The exemption amount under section 55(d) shall be zero.
I.R.C. § 641(c)(2)(C)
The only items of income, loss, deduction, or credit to be taken into account are the following:
I.R.C. § 641(c)(2)(C)(i)
The items required to be taken into account under section 1366.
I.R.C. § 641(c)(2)(C)(ii)
Any gain or loss from the disposition of stock in an S corporation.
I.R.C. § 641(c)(2)(C)(iii)
To the extent provided in regulations, State or local income taxes or administrative expenses to the extent allocable to items described in clauses (i) and (ii).
I.R.C. § 641(c)(2)(C)(iv)
Any interest expense paid or accrued on indebtedness incurred to acquire stock in an S corporation.
No deduction or credit shall be allowed for any amount not described in this paragraph, and no item described in this paragraph shall be apportioned to any beneficiary.
I.R.C. § 641(c)(2)(D)
No amount shall be allowed under paragraph (1) or (2) of section 1211(b).
I.R.C. § 641(c)(2)(E)
I.R.C. § 641(c)(2)(E)(i)
Section 642(c) shall not apply.
I.R.C. § 641(c)(2)(E)(ii)
For purposes of section 170(b)(1)(G), adjusted gross income shall be computed in the same manner as in the case of an individual, except that the deductions for costs which are paid or incurred in connection with the administration of the trust and which would not have been incurred if the property were not held in such trust shall be treated as allowable in arriving at adjusted gross income.
I.R.C. § 641(c)(3) Treatment Of Remainder Of Trust And Distributions
For purposes of determining—
I.R.C. § 641(c)(3)(A)
the amount of the tax imposed by this chapter on the portion of any electing small business trust not treated as a separate trust under paragraph (1), and
I.R.C. § 641(c)(3)(B)
the distributable net income of the entire trust,
the items referred to in paragraph (2)(C) shall be excluded. Except as provided in the preceding sentence, this subsection shall not affect the taxation of any distribution from the trust.
I.R.C. § 641(c)(4) Treatment Of Unused Deductions Where Termination Of Separate Trust
If a portion of an electing small business trust ceases to be treated as a separate trust under paragraph (1), any carryover or excess deduction of the separate trust which is referred to in section 642(h) shall be taken into account by the entire trust.
I.R.C. § 641(c)(5) Electing Small Business Trust
For purposes of this subsection, the term “electing small business trust” has the meaning given such term by section 1361(e)(1).
(Aug. 16, 1954, ch. 736, 68A Stat. 215; Dec. 30, 1969, Pub. L. 91-172, title VIII, 803(d)(3), 83 Stat. 684; Oct. 4, 1976, Pub. L. 94-455, title VII, 701(e)(2), 90 Stat. 1579; May 23, 1977, Pub. L. 95-30, title I, 101(d)(8), 91 Stat. 134; Aug. 20, 1996, Pub. L. 104-188, title I, Sec. 1302(d), 110 Stat. 1755; Pub. L. 105-34, title XVI, Sec. 1601(i)(3)(B), Aug. 5, 1997, 111 Stat 788; Pub. L. 105-206, title VI, Sec. 6007(f)(2), July 22, 1998, 112 Stat 685; Pub. L. 110-28, title VIII, Sec. 8236(a), May 25, 2007, 121 Stat. 112; Pub. L. 115-97 title I, Sec. 13542(a), Dec. 22, 2017, 131 Stat. 2054.)
BACKGROUND NOTES
Amendments Subpart
1986--Pub. L. 99-514, title XIV, 1403(b), Oct. 22, 1986, 100 Stat. 2713, added item 645.
1976--Pub. L. 94-455, title VII, 701(g)(2), Oct. 4, 1976, 90 Stat. 1580, added item 644.
AMENDMENTS
2017—Subsec. (c)(2)(E). Pub. L. 115-97, Sec. 13542(a), added subpar. (E).
2007—Subsec. (c)(2)(C)(iv). Pub. L. 110-28, Sec. 8236(a), added clause (iv).
1998—Subsec. (c). Pub. L. 105-206, Sec. 6007(f)(2), struck (c). Prior to being striken, subsec. (c) read as follows:
“(c) Exclusion of includible gain from taxable income
“(1) General rule
For purposes of this part, the taxable income of a trust does not include the amount of any includible gain as defined in section 644(b) reduced by any deductions properly allocable thereto.
“(2) Cross reference
For the taxation of any includible gain, see section 644.”
Subsec. (d). Pub. L. 105-206, Sec. 6007(f)(2), redesignated subsec. (d) as subsec. (c).
1997--Subsec. (b). Pub. L. 105-34, Sec. 1601(i)(3)(B), added a sentence at the end of subsec. (b).
1996--Subsec. (d). Pub. L. 104-188, Sec. 1302(d), added subsec. (d).
1977--Subsec. (a). Pub. L. 95-30 substituted “section 1(e)” for “section 1(d)” in introductory provisions.
1976--Subsec. (c). Pub. L. 94-455 added subsec. (c).
1969--Subsec. (a). Pub. L. 91-172 substituted “The tax imposed by section 1(d)” for “The taxes imposed by this chapter on individuals”.
EFFECTIVE DATE OF 2017 AMENDMENT
Amendment by Sec. 13542(a) of Pub. L. 115-97 effective for taxable years beginning after December 31, 2017.
EFFECTIVE DATE OF 2007 AMENDMENT
Amendment by Sec. 8236(a) of Pub. L. 110-28 effective for taxable years beginning after December 31, 2006.
EFFECTIVE DATE OF 1998 AMENDMENTS
Amendment by Sec. 6007(f)(2) of Pub. L. 105-206 effective as if included in the provisions of the Taxpayer Relief Act of 1997 to which they relate [Effective Date of Pub. L. 105-34, Sec. 507: Sales or exchanges after Aug. 5, 1997].
EFFECTIVE DATE OF 1997 AMENDMENTS
Amendment by Sec. 1601(i)(3)(B) of Pub. L. 105-34 effective as if included in the provisions of the Small Business Job Protection of 1996 to which they relate.
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by Pub. L. 104-188, Sec. 1302(d), effective for taxable years beginning after December 31, 1996.
EFFECTIVE DATE OF 1977 AMENDMENT
Amendment by Pub. L. 95-30 applicable to taxable years beginning after Dec. 31, 1976, see section 106(a) of Pub. L. 95-30, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by Pub. L. 94-455 applicable to transfers in trust made after May 21, 1976, see section 701(h) of Pub. L. 94-455, set out as a note under section 667 of this title.
EFFECTIVE DATE OF 1969 AMENDMENT
Amendment by Pub. L. 91-172 applicable to taxable years beginning after Dec. 31, 1970, see section 803(f) of Pub. L. 91-172, set out as a note under section 1 of this title.