# § 681. Limitation on charitable deduction
**(a)** **Trade or business income** In computing the deduction allowable under section 642(c) to a trust, no amount otherwise allowable under section 642(c) as a deduction shall be allowed as a deduction with respect to income of the taxable year which is allocable to its unrelated business income for such year. For purposes of the preceding sentence, the term “unrelated business income” means an amount equal to the amount which, if such trust were exempt from tax under section 501(a) by reason of section 501(c)(3), would be computed as its unrelated business taxable income under section 512 (relating to income derived from certain business activities and from certain property acquired with borrowed funds).
**(b)** **Cross reference** For disallowance of certain charitable, etc., deductions otherwise allowable under section 642(c), see sections 508(d) and 4948(c)(4).
---
**Source Credit**: (Aug. 16, 1954, ch. 736, 68A Stat. 232; Pub. L. 90–630, § 6(b), Oct. 22, 1968, 82 Stat. 1330; Pub. L. 91–172, title I, §§ 101(j)(18), (19), 121(d)(2)(B), Dec. 30, 1969, 83 Stat. 528, 547.)
## Editorial Notes
### Amendments
1969—Subsec. (a). , substituted reference to certain property acquired with borrowed funds for reference to certain leases.
Subsec. (b). , (19), redesignated subsec. (d) as (b) and substituted “sections 518(d) and 4948(c)(4)” for “section 503(e)”. Former subsec. (b), dealing generally with the operation of trusts, was struck out.
Subsec. (c). , struck out subsec. (c) dealing with accumulated income.
Subsec. (d). , redesignated subsec. (d) as (b).
1968—Subsec. (c). inserted provision that par. (1) does not apply to income attributable to property transferred to a trust before , by the creator thereof if the trust was irrevocable on such date and if the income is required to be accumulated pursuant to the mandatory terms of the instrument creating the trust.
## Statutory Notes and Related Subsidiaries
### Effective Date of 1969 Amendment
Amendment by section 101(j)(18), (19) of effective , see , set out as an Effective Date note under .
Amendment by applicable to taxable years beginning after , see , set out as a note under .
### Effective Date of 1968 Amendment
> “The amendments made by subsection (a) [amending
>
> ] and (b) [amending this section] shall apply with respect to taxable years beginning after
>
> , and ending after
>
> . For purposes of sections 3814 and 162(g)(4) of the Internal Revenue Code of 1939, provisions having the same effect as such amendments shall be treated as included in such sections effective with respect to taxable years beginning after
>
> .”
, , , provided that: