Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 75-68

1975-1 C.B. 184

Section 61 -- Gross Income Defined
Sec. 163
Sec. 662

Full Text

Rev. Rul. 75-68 [fn1]

The income of a testamentary trust consisting solely of interest from mortgages on the beneficiary's property was required to be distributed periodically. Although the mortgage notes held by the trust required the periodic payment of interest, it was agreed between the beneficiary and the trustees, that the beneficiary would pay no interest on the mortgages and the trustees would distribute no income from the trust.

Held, notwithstanding the foregoing agreement, the interest income due on the mortgages held by the trust is includible in the gross income of the trust, and this same amount, as the distributable income of the trust, is includible in the gross income of the beneficiary. Further, the beneficiary is entitled to a deduction for this interest deemed paid on the mortgages.

O.D. 606, 3 C.B. 211(1920), is superseded, since the position stated therein is restated under the current statute and regulations in this Revenue Ruling.

[fn1] Prepared pursuant to Rev. Proc. 67-6, 1967-1 C.B. 576.