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Title 26 — Internal Revenue CodeRelease 119-73

§661 Deduction for Estates and Trusts Accumulating Income or Distributing Corpus

Title 26 › Subtitle Subtitle A— Income Taxes › Chapter 1— NORMAL TAXES AND SURTAXES › Subchapter J— Estates, Trusts, Beneficiaries, and Decedents › Part I— ESTATES, TRUSTS, AND BENEFICIARIES › Subpart C— Estates and Trusts Which May Accumulate Income or Which Distribute Corpus › § 661

Last updated Apr 6, 2026|Official source

Summary

An estate or trust that pays money out to beneficiaries gets a deduction for those payments, so the same income is not taxed twice. The deduction covers income the estate or trust is required to distribute for the year plus any other amounts it actually pays, credits, or must distribute. The total deduction can never be more than the estate's or trust's distributable net income for the year. What goes out is treated as a proportional mix of the different kinds of income the estate or trust earned, unless the will or trust document validly directs specific income to specific people. No deduction is allowed for the part of a distribution that comes from income the estate or trust never had to include in its own taxable income, such as tax-exempt interest.

Full Legal Text

Title 26, §661

Internal Revenue Code — Source: USLM XML via OLRC

(a)In any taxable year there shall be allowed as a deduction in computing the taxable income of an estate or trust (other than a trust to which subpart B applies), the sum of—
(1)any amount of income for such taxable year required to be distributed currently (including any amount required to be distributed which may be paid out of income or corpus to the extent such amount is paid out of income for such taxable year); and
(2)any other amounts properly paid or credited or required to be distributed for such taxable year;
(b)The amount determined under subsection (a) shall be treated as consisting of the same proportion of each class of items entering into the computation of distributable net income of the estate or trust as the total of each class bears to the total distributable net income of the estate or trust in the absence of the allocation of different classes of income under the specific terms of the governing instrument. In the application of the preceding sentence, the items of deduction entering into the computation of distributable net income (including the deduction allowed under section 642(c)) shall be allocated among the items of distributable net income in accordance with regulations prescribed by the Secretary.
(c)No deduction shall be allowed under subsection (a) in respect of any portion of the amount allowed as a deduction under that subsection (without regard to this subsection) which is treated under subsection (b) as consisting of any item of distributable net income which is not included in the gross income of the estate or trust.

Legislative History

Notes & Related Subsidiaries

Editorial Notes

Amendments

1983—Subsec. (a). Pub. L. 98–67 repealed

Amendments

made by Pub. L. 97–248. See 1982 Amendment note below. 1982—Subsec. (a). Pub. L. 97–248 provided that, applicable to payments of interest, dividends, and patronage dividends paid or credited after
June 30, 1983, subsec. (a) is amended by inserting at end “For purposes of paragraph (1), the amount of distributable net income shall be computed without the deduction allowed by section 642(c).”. section 102(a), (b) of Pub. L. 98–67, title I, Aug. 5, 1983, 97 Stat. 369, repealed subtitle A (§§ 301–308) of title III of Pub. L. 97–248 as of the close of
June 30, 1983, and provided that the Internal Revenue Code of 1954 (this title) shall be applied and administered (subject to certain exceptions) as if such subtitle A (and the

Amendments

made by such subtitle A) had not been enacted. 1976—Subsec. (b). Pub. L. 94–455 struck out “or his delegate” after “Secretary”.

Reference

Citations & Metadata

Citation

26 U.S.C. § 661

Title 26 — Internal Revenue Code

Last Updated

Apr 6, 2026

Release point: 119-73