§ 641. Imposition of tax
(a)
Application of tax
The tax imposed by section
1
(e) shall apply to the taxable income of estates or of any kind of property held in trust, including—
(1)
income accumulated in trust for the benefit of unborn or unascertained persons or persons with contingent interests, and income accumulated or held for future distribution under the terms of the will or trust;
(2)
income which is to be distributed currently by the fiduciary to the beneficiaries, and income collected by a guardian of an infant which is to be held or distributed as the court may direct;
(b)
Computation and payment
The taxable income of an estate or trust shall be computed in the same manner as in the case of an individual, except as otherwise provided in this part. The tax shall be computed on such taxable income and shall be paid by the fiduciary. For purposes of this subsection, a foreign trust or foreign estate shall be treated as a nonresident alien individual who is not present in the United States at any time.
(c)
Special rules for taxation of electing small business trusts
(1)
In general
For purposes of this chapter—
(2)
Modifications
For purposes of paragraph (1), the modifications of this paragraph are the following:
(A)
Except as provided in section
1
(h), the amount of the tax imposed by section
1
(e) shall be determined by using the highest rate of tax set forth in section
1
(e).
(C)
The only items of income, loss, deduction, or credit to be taken into account are the following:
(iii)
To the extent provided in regulations, State or local income taxes or administrative expenses to the extent allocable to items described in clauses (i) and (ii).
(iv)
Any interest expense paid or accrued on indebtedness incurred to acquire stock in an S corporation.
No deduction or credit shall be allowed for any amount not described in this paragraph, and no item described in this paragraph shall be apportioned to any beneficiary.
(3)
Treatment of remainder of trust and distributions
For purposes of determining—
(A)
the amount of the tax imposed by this chapter on the portion of any electing small business trust not treated as a separate trust under paragraph (1), and
the items referred to in paragraph (2)(C) shall be excluded. Except as provided in the preceding sentence, this subsection shall not affect the taxation of any distribution from the trust.