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§ 13.2 QUALIFYING POOLED INCOME FUNDSinterest, compounded as provided below. 44 The governing instrument of thefund must direct the trustee to distribute income currently or within the first65 days following the close of the tax year in which the income is earned. Anysuch payment made after the close of the tax year must be treated as paid onthe last day of the tax year. A statement must be attached to the return of thepooled income fund indicating the date and amount of these payments afterthe close of the tax year. The beneficiary must include in his or her grossincome all amounts properly paid, credited, or required to be distributed to thebeneficiary during the tax year or years of the fund ending within or with hisor her tax year. The governing instrument of the fund must provide that theincome interest of any designated beneficiary must either terminate with thelast regular payment made before the death of the beneficiary or be prorated tothe date of his or her death. 45(h) Termination of Life Income InterestUpon termination of the income interest retained or created by any donor, thetrustee of the pooled income fund must sever from the fund an amount equalto the value of the remainder interest in the property upon which the incomeinterest is based. The value of the remainder interest for this purpose may beeither• its value as of the determination date next succeeding the termination ofthe income interest, or• its value as of the date on which the last regular payment was madebefore the death of the beneficiary, if the income interest is terminated onthe payment date. 46In one instance, the governing instrument of a pooled income fund providedthat the income interest of each income beneficiary would terminate with theincome payment immediately preceding the beneficiary’s death. The valuationdates selected were January 1, April 1, July 1, and October 1. The payment dateswere March 15, June 15, September 15, and December 15. A beneficiary of anincome interest died on May 15. The property to be severed from the fund wasvalued as of July 1, as that was the valuation date immediately following thedate of death (May 15). The determination date that next succeeded the terminationon March 15 of the income interest was April 1. The last regular paymentprior to the death of the beneficiary was made on March 15. The IRS held thatthe fund did not qualify as a pooled income fund because the property was neithervalued as of the determination date next succeeding the termination of theincome interest nor valued as of the date on which the last regular payment wasmade before the death of the beneficiary. 4744 IRC § 642(c)(5)(F); Reg. § 1.642(c)-5(b)(7). See § 13.3.45 Reg. § 1.642(c)-5(b)(7).46 Id.47 Rev. Rul. 76-196, 1976-1 C.B. 178. 483