26 U.S.C. § 663 — Special rules applicable to sections 661 and 662

(a) Exclusions. The following are not amounts under section 661(a) or 662(a): (1) Gifts and bequests. An amount that the governing instrument properly pays or credits as a gift or bequest of a specific sum or specific property, paid or credited all at once or in no more than three installments. An amount payable or creditable only from estate or trust income is not a specific-money gift or bequest. (2) Charitable distributions. An amount paid, permanently set aside, or otherwise qualifying for the section 642(c) deduction, calculated without sections 508(d), 681, and 4948(c)(4). (3) No double deduction. An amount paid, credited, or distributed in the taxable year if section 651 or 661 applied to it for an earlier estate or trust taxable year because it was credited or required to be distributed in that earlier year. (b) First 65 days. (1) If an estate or trust properly pays or credits an amount within the first 65 days of a taxable year, the amount is treated as paid or credited on the last day of the preceding taxable year. (2) This rule applies for a taxable year only if the executor or fiduciary elects it in the manner and time set by the Secretary’s regulations. (c) Separate shares. Solely for determining distributable net income under sections 661 and 662, substantially separate and independent shares of different beneficiaries in one trust are treated as separate trusts. Similar rules treat such shares in an estate with more than one beneficiary as separate estates. Regulations issued by the Secretary determine whether shares are substantially separate and independent and how they are treated, including subpart D’s application.