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POOLED INCOME FUNDSThe amount so severed from the fund must either be paid to, or retainedfor the use of, the designated public charity, as provided in the governinginstrument. 48§ 13.3 ALLOCATION OF INCOMEEvery income interest retained or created in property transferred to a pooledincome fund must be assigned a proportionate share of the annual incomeearned by the fund. The share or unit of participation must be based on the fairmarket value of the property on the date of transfer. 49(a) Units of ParticipationOn each transfer of property by a donor to a pooled income fund, one or moreunits of participation in the fund must be assigned to the beneficiary or beneficiariesof the income interest retained or created in the property. The number ofunits of participation must be equal to the number obtained by dividing the fairmarket value of the property by the fair market value of a unit in the fund at thetime of the transfer. 50 This is known as the unit plan.Under the unit plan, the fair market value of a unit in a pooled incomefund at the time of the transfer must be determined by dividing the fair marketvalue of all property in the fund at that time by the number of units then in thefund. The initial fair market value of a unit in a pooled income fund is the fairmarket value of the property transferred to the fund, divided by the number ofunits assigned to the income interest in that property. The value of each unit ofparticipation will fluctuate with each new transfer of property to the fund, inrelation to the appreciation or depreciation in the fair market value of theproperty in the fund, but all units in the fund will always have equal value. 51Under the unit plan, the share of income allocated to each unit of participationmust be determined by dividing the income of the fund for the tax year bythe outstanding number of units in the fund at the end of the year, except that,consistent with the rate of return requirements, 52 income must be allocated tounits outstanding during only part of the year by taking into consideration theperiod of time for which the units were outstanding. For this purpose, the actualincome of the part of the tax year, or a prorated portion of the annual income,may be used, after making such adjustments as are reasonably necessary toreflect fluctuations during the year to the fair market value of the property inthe fund. 5348 Reg. § 1.642(c)-5(b)(8).49 Reg. § 1.642(c)-5(c)(1).50 Reg. § 1.642(c)-5(c)(2)(i)(a).51 Reg. § 1.642(c)-5(c)(2)(i)(b).52 See § 13.2(g).53 Reg. § 1.642(c)-5(c)(2)(i)(c). If one pooled income fund is combined with another pooled income fund andthen terminated, each income beneficiary of the terminating fund is allocated units of participation in the survivingfund, computed by dividing the fair market value of the beneficiary’s units in the terminating fund bythe fair market value of the beneficiary’s units in the surviving fund on the date on which the funds are combined.Priv. Ltr. Rul. 9332033. 484