USC Subpart F

in effect

26 U.S.C. § 681 Limitation on charitable deduction

(a) Trade or business incomeIn 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 referenceFor disallowance of certain charitable, etc., deductions otherwise allowable under section 642(c), see sections 508(d) and 4948(c)(4).

26 U.S.C. § 683 Use of trust as an exchange fund

(a) General ruleExcept as provided in subsection (b), if property is transferred to a trust in exchange for an interest in other trust property and if the trust would be an investment company (within the meaning of section 351) if it were a corporation, then gain shall be recognized to the transferor. (b) Exception for pooled income fundsSubsection (a) shall not apply to any transfer to a pooled income fund (within the meaning of section 642(c)(5)).

26 U.S.C. § 684 Recognition of gain on certain transfers to certain foreign trusts and estates

(a) In generalExcept as provided in regulations, in the case of any transfer of property by a United States person to a foreign estate or trust, for purposes of this subtitle, such transfer shall be treated as a sale or exchange for an amount equal to the fair market value of the property transferred, and the transferor shall recognize as gain the excess of—(1) the fair market value of the property so transferred, over (2) the adjusted basis (for purposes of determining gain) of such property in the hands of the transferor. (b) ExceptionSubsection (a) shall not apply to a transfer to a trust by a United States person to the extent that any person is treated as the owner of such trust under section 671. (c) Treatment of trusts which become foreign trustsIf a trust which is not a foreign trust becomes a foreign trust, such trust shall be treated for purposes of this section as having transferred, immediately before becoming a foreign trust, all of its assets to a foreign trust.

26 U.S.C. § 685 Treatment of funeral trusts

(a) In generalIn the case of a qualified funeral trust—(1) subparts B, C, D, and E shall not apply, and (2) no deduction shall be allowed by section 642(b). (b) Qualified funeral trustFor purposes of this subsection, the term “qualified funeral trust” means any trust (other than a foreign trust) if—(1) the trust arises as a result of a contract with a person engaged in the trade or business of providing funeral or burial services or property necessary to provide such services, (2) the sole purpose of the trust is to hold, invest, and reinvest funds in the trust and to use such funds solely to make payments for such services or property for the benefit of the beneficiaries of the trust, (3) the only beneficiaries of such trust are individuals with respect to whom such services or property are to be provided at their death under contracts described in paragraph (1), (4) the only contributions to the trust are contributions by or for the benefit of such beneficiaries, (5) the trustee elects the application of this subsection, and (6) the trust would (but for the election described in paragraph (5)) be treated as owned under subpart E by the purchasers of the contracts described in paragraph (1). A trust shall not fail to be treated as meeting the requirement of paragraph (6) by reason of the death of an individual but only during the 60-day period beginning on the date of such death. (c) Application of rate scheduleSection 1(e) shall be applied to each qualified funeral trust by treating each beneficiary’s interest in each such trust as a separate trust. (d) Treatment of amounts refunded to purchaser on cancellationNo gain or loss shall be recognized to a purchaser of a contract described in subsection (b)(1) by reason of any payment from such trust to such purchaser by reason of cancellation of such contract. If any payment referred to in the preceding sentence consists of property other than money, the basis of such property in the hands of such purchaser shall be the same as the trust’s basis in such property immediately before the payment. (e) Simplified reportingThe Secretary may prescribe rules for simplified reporting of all trusts having a single trustee and of trusts terminated during the year.