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Title 26, Internal Revenue CodeRelease 119-110

§681 Limitation on Charitable Deduction

Title 26 › Subtitle A — Income Taxes › CHAPTER 1 — NORMAL TAXES AND SURTAXES › Subchapter J — Estates, Trusts, Beneficiaries, and Decedents › PART I — ESTATES, TRUSTS, AND BENEFICIARIES › Subpart F — Miscellaneous › § 681

Last updated Sep 22, 2026|Official source

Summary

A trust cannot use any income that is its "unrelated business income" to get a charitable deduction when figuring taxes for the year. "Unrelated business income" means the amount that would be treated as taxable business income under the rules for tax‑exempt charities (what section 512 calls unrelated business taxable income) if the trust were a 501(c)(3) charity. Also see sections 508(d) and 4948(c)(4) for other rules that bar some charitable deductions.

Full Legal Text

Title 26, §681

Internal Revenue Code, Source: USLM XML via OLRC

(a)Trade or business income
In computing the deduction allowable under section 642(c) to a trust, no amount otherwise allowable under section 642(c) as a deduction shall be allowed as a deduction with respect to income of the taxable year which is allocable to its unrelated business income for such year. For purposes of the preceding sentence, the term “unrelated business income” means an amount equal to the amount which, if such trust were exempt from tax under section 501(a) by reason of section 501(c)(3), would be computed as its unrelated business taxable income under section 512 (relating to income derived from certain business activities and from certain property acquired with borrowed funds).
(b)Cross reference
For disallowance of certain charitable, etc., deductions otherwise allowable under section 642(c), see section 508(d) and 4948(c)(4).

Legislative History

Notes & Related Subsidiaries

Editorial Notes

Amendments

1969—Subsec. (a). Pub. L. 91–172, § 121(d)(2)(B), substituted reference to certain property acquired with borrowed funds for reference to certain leases. Subsec. (b). Pub. L. 91–172, § 101(j)(18), (19), redesignated subsec. (d) as (b) and substituted “section 518(d) and 4948(c)(4)” for “section 503(e)”. Former subsec. (b), dealing generally with the operation of trusts, was struck out. Subsec. (c). Pub. L. 91–172, § 101(j)(18), struck out subsec. (c) dealing with accumulated income. Subsec. (d). Pub. L. 91–172, § 101(j)(19), redesignated subsec. (d) as (b). 1968—Subsec. (c). Pub. L. 90–630 inserted provision that par. (1) does not apply to income attributable to property transferred to a trust before January 1, 1951, by the creator thereof if the trust was irrevocable on such date and if the income is required to be accumulated pursuant to the mandatory terms of the instrument creating the trust.

Statutory Notes and Related Subsidiaries

Effective Date

of 1969 AmendmentAmendment by section 101(j)(18), (19) of Pub. L. 91–172 effective Jan. 1, 1970, see section 101(k)(1) of Pub. L. 91–172, set out as an

Effective Date

note under section 4940 of this title. Amendment by section 121(d)(2)(B) of Pub. L. 91–172 applicable to taxable years beginning after Dec. 31, 1969, see section 121(g) of Pub. L. 91–172, set out as a note under section 511 of this title.

Effective Date

of 1968 Amendment Pub. L. 90–630, § 6(c), Oct. 22, 1968, 82 Stat. 1330, provided that: “The

Amendments

made by subsection (a) [amending section 504 of this title] and (b) [amending this section] shall apply with respect to taxable years beginning after
December 31, 1953, and ending after
August 16, 1954. For purposes of section 3814 and 162(g)(4) of the Internal Revenue Code of 1939, provisions having the same effect as such

Amendments

shall be treated as included in such sections effective with respect to taxable years beginning after December 31, 1950.”

Reference

Citations & Metadata

Citation

26 U.S.C. § 681

Title 26, Internal Revenue Code

Last Updated

Sep 22, 2026

Release point: 119-110