Contents
Contents Contents
§ 13.3 ALLOCATION OF INCOMEThe governing instrument of a pooled income fund may provide any otherreasonable method not described under the unit plan rules for assigning units ofparticipation in the fund and allocating income to the units, as long as it reachesa result reasonably consistent with the unit plan rules. 54If a transfer of property to a pooled income fund by a donor occurs on a dateother than a determination date, the number of units of participation assigned tothe income interest in the property may be determined by using the fair marketvalue of the property in the fund on the determination date immediately precedingthe date of transfer (determined without regard to the property so transferred)—subject,however, to appropriate adjustments on the next succeedingdetermination date. These adjustments may be made by any reasonable method,including the use of a method whereby the fair market value of the property inthe fund at the time of the transfer is deemed to be the average of the fair marketvalues of the property in the fund on the determination dates immediately precedingand succeeding the date of transfer. For purposes of determining thisaverage, any property transferred to the fund between the preceding and succeedingdates, or on the succeeding date, must be excluded. 55 The application ofthis rule may be illustrated by the following example.EXAMPLE 13.1The determination dates of a pooled income fund are the first day of each calendar month. OnApril 1, 2005, the fair market value of the property in the fund was $100,000, at which time1,000 units of participation were outstanding with a value of $100 each. On April 15, 2005, Btransferred property with a fair market value of $50,000 to the fund, retaining for himself for lifean income interest in the property. No other property was transferred to the fund after April 1,2005. On May 1, 2005, the fair market value of the property in the fund, including the propertytransferred by B, was $160,000. The average of the fair market values of the property in thefund (excluding the property transferred by B) on April 1 and May 1, 2005, was $105,000($100,000 + [$160,000 − $50,000] ÷ 2). Accordingly, the fair market value of a unit ofparticipation in the fund on April 15, 2005, at the time of B’s transfer, may be deemed to be$105 ($105,000/1,000 units), and B was assigned 476.19 units of participation in the fund($50,000/$105). aaId.(b) Partial Allocation of Income to CharityNotwithstanding the above rules concerning units of participation, the governinginstrument of a pooled income fund may provide that a unit of participationis entitled to share in the income of a fund in a lesser amount than would otherwisebe determined under those rules, provided that the income otherwise allocableto the unit under the rules is paid within the tax year in which it isreceived to the public charity to or for the use of which the remainder interest iscontributed under the governing instrument of the fund. 56 Application of theforegoing rule may be illustrated by Examples 13.2, 13.3, and 13.4.54 Reg. § 1.642(c)-5(c)(2)(ii).55 Reg. § 1.642(c)-5(c)(2)(iii).56 Reg. § 1.642(c)-5(c)(3). 485
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§ 13.3 ALLOCATION OF INCOMEThe governing instrument of a pooled income fund may provide any otherreasonable method not described under the unit plan rules for assigning units ofparticipation in the fund and allocating income to the units, as long as it reachesa result reasonably consistent with the unit plan rules. 54If a transfer of property to a pooled income fund by a donor occurs on a dateother than a determination date, the number of units of participation assigned tothe income interest in the property may be determined by using the fair marketvalue of the property in the fund on the determination date immediately precedingthe date of transfer (determined without regard to the property so transferred)—subject,however, to appropriate adjustments on the next succeedingdetermination date. These adjustments may be made by any reasonable method,including the use of a method whereby the fair market value of the property inthe fund at the time of the transfer is deemed to be the average of the fair marketvalues of the property in the fund on the determination dates immediately precedingand succeeding the date of transfer. For purposes of determining thisaverage, any property transferred to the fund between the preceding and succeedingdates, or on the succeeding date, must be excluded. 55 The application ofthis rule may be illustrated by the following example.EXAMPLE 13.1The determination dates of a pooled income fund are the first day of each calendar month. OnApril 1, 2005, the fair market value of the property in the fund was $100,000, at which time1,000 units of participation were outstanding with a value of $100 each. On April 15, 2005, Btransferred property with a fair market value of $50,000 to the fund, retaining for himself for lifean income interest in the property. No other property was transferred to the fund after April 1,2005. On May 1, 2005, the fair market value of the property in the fund, including the propertytransferred by B, was $160,000. The average of the fair market values of the property in thefund (excluding the property transferred by B) on April 1 and May 1, 2005, was $105,000($100,000 + [$160,000 − $50,000] ÷ 2). Accordingly, the fair market value of a unit ofparticipation in the fund on April 15, 2005, at the time of B’s transfer, may be deemed to be$105 ($105,000/1,000 units), and B was assigned 476.19 units of participation in the fund($50,000/$105). aaId.(b) Partial Allocation of Income to CharityNotwithstanding the above rules concerning units of participation, the governinginstrument of a pooled income fund may provide that a unit of participationis entitled to share in the income of a fund in a lesser amount than would otherwisebe determined under those rules, provided that the income otherwise allocableto the unit under the rules is paid within the tax year in which it isreceived to the public charity to or for the use of which the remainder interest iscontributed under the governing instrument of the fund. 56 Application of theforegoing rule may be illustrated by Examples 13.2, 13.3, and 13.4.54 Reg. § 1.642(c)-5(c)(2)(ii).55 Reg. § 1.642(c)-5(c)(2)(iii).56 Reg. § 1.642(c)-5(c)(3). 485