Reg. § 1.102-1 Gifts and inheritances.
(a) General rule Property received as a gift, or received under a will or under statutes of descent and distribution, is not includible in gross income, although the income from such property is includible in gross income. An amount of principal paid under a marriage settlement is a gift. However, see section and the regulations thereunder for rules relating to alimony or allowances paid upon divorce or separation. Section does not apply to prizes and awards (see section and ) nor to scholarships and fellowship grants (see section and the regulations thereunder).
(b) Income from gifts and inheritances The income from any property received as a gift, or under a will or statute of descent and distribution shall not be excluded from gross income under of this section.
(c) Gifts and inheritances of income If the gift, bequest, devise, or inheritance is of income from property, it shall not be excluded from gross income under of this section. Section provides a special rule for the treatment of certain gifts, bequests, devises, or inheritances which by their terms are to be paid, credited, or distributed at intervals. Except as provided in section and of this section, to the extent any such gift, bequest, devise, or inheritance is paid, credited, or to be distributed out of income from property, it shall be considered a gift, bequest, devise, or inheritance of income from property. Section provides the same treatment for amounts of income from property which is paid, credited, or to be distributed under a gift or bequest whether the gift or bequest is in terms of a right to payments at intervals (regardless of income) or is in terms of a right to income. To the extent the amounts in either case are paid, credited, or to be distributed at intervals out of income, they are not to be excluded under section from the taxpayer's gross income.
(d) Effect of Subchapter J Any amount required to be included in the gross income of a beneficiary under sections , , or shall be treated for purposes of this section as a gift, bequest, devise, or inheritance of income from property. On the other hand, any amount excluded from the gross income of a beneficiary under section shall be treated for purposes of this section as property acquired by gift, bequest, devise, or inheritance.
(e) Income taxed to grantor or assignor Section is not intended to tax a donee upon the same income which is taxed to the grantor of a trust or assignor of income under section or sections through , inclusive.