1. (1) Charitable remainder trusts, as defined in §664 of the Internal Revenue Code, are taxable in the following manner:

   1. (a) Income earned by such a trust shall be taxable up to the amount of such income distributed to the income beneficiary whether such income is earned in the tax year or is undistributed income from prior years.

   2. (b) The amount distributed to the income beneficiary shall be considered paid from the trust income or corpus in the following order:

      1. 1. Income subject to the 6% tax rate under T.C.A. § 67-2-102(a) which is earned in the tax year or is undistributed income of the trust for prior years.
      2. 2. Income not subject to the tax which is earned in the tax year or is undistributed income of the trust for prior years
      3. 3. Trust corpus.

Authority: T.C.A. §§67-1-102, 67-1-102(a), and 67-2-113. Administrative History: Original rule filed November 29, 1976; effective December 29, 1976. Amendment filed May 14, 2003; effective July 28, 2003.