(a) The provisions of section 643 may be illustrated by the following 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 | |
(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.
The preliminary Code is a preliminary release of the Internal Revenue Code of 1986 (the "Code") by the Office of the Law Revision Counsel and is subject to further revision before it is released again as a final version. The source of the preliminary Code used in TouchTax is available here: https://uscode.house.gov/download/download.shtml. The Code is a consolidation and codification by subject matter of the general and permanent laws of the U.S. prepared by the Office of the Law Revision Counsel of the U.S. House of Representatives. The Treasury Regulations are a codification of the general and permanent rules published in the Federal Register by the departments and agencies of the federal government. The version of the Treasury Regulations available within TouchTax is part of the Electronic Code of Federal Regulations which is not an official legal edition of the Code of Federal Regulations but is an editorial compilation of CFR material and Federal Register amendments produced by the National Archives and Records Administration's Office of the Federal Register (OFR) and the Government Publishing Office. The source of the CFR used in TouchTax is available here: https://www.govinfo.gov/bulkdata/ECFR/title-26. Those using TouchTax for legal research should verify their results against the printed versions of the Code and Treasury Regulations. TouchTax is copyright 2024 by Com-Lab (Mobile). Learn more at http://touchtax.edrich.de.