Throwback Rule

Throwback Rule may have one of the following meanings, depending the context of the term:

1. a method of taxing beneficiaries of complex trusts on delayed distributions of income as if the beneficiaries had received the income on a current basis.

2. a special rule for gain on property transferred to a trust at less than fair market value. A tax is imposed on this unrealized appreciation to stop a grantor from shifting the income to the trust, which is taxed at lower progressive rates.

3. an exception to the destination test for multistate corporations. If a corporation is not subject to a sales tax in the destination state (or the purchaser is the U.S. government), any sales are treated as in-state sales of the origination state, and the product's destination is disregarded. Thus, if the seller is immune from taxation in the destination state, any sales are considered to be in-state sales of the origination state that has this throwback rule. Former IRC (check if this IRC provision is current here) §665.

See Indirect Tax in the U.S. Reference and Indirect Tax in the International reference.

See Sales tax in the U.S. Encyclopedia and Sales tax in the International Encyclopedia