§641 Imposition of Tax

Summary

Imposes a tax on the income of estates and trusts. That tax covers income kept in trust for unborn or contingent beneficiaries, income set aside for future distribution, income that must or may be paid out now, and income collected while an estate is being settled. The tax is figured the same way as for an individual and must be paid by the person in charge of the estate or trust. A foreign trust is treated like a nonresident alien individual who is never in the United States. Has special rules for electing small business trusts (ESBTs). The part of an ESBT made up of S corporation stock is treated as its own trust and taxed using the highest rate in section 1(e) (except section 1(h)), with no exemption under section 55(d). Only certain items count for that part: S-corporation pass-through items under section 1366, gains or losses from selling the S stock, state or local taxes and related admin costs to the extent they apply, and interest on debt to buy the stock. Rules in section 1211(b)(1) and (2) and section 642(c) do not apply. Adjusted gross income is figured like an individual but allows trust administration costs. If the separate S-stock part stops being separate, any carryover deductions move to the whole trust. ESBT is defined in section 1361(e)(1).