The share of a nonresident estate or nonresident trust, and the share of a nonresident beneficiary of any estate or trust, of items of estate or trust income, gain, loss and deduction for purposes of § 1124 of this title shall be determined as follows:
(1) To the amount of items of income, gain, loss and deduction which enter into the definition of distributable net income, there shall be added or subtracted, as the case may be, the modifications described in § 1106 of this title to the extent they relate to items of income, gain, loss and deduction which also enter into the definition of distributable net income. No modification shall be made under this section which has the effect of duplicating an item already reflected in the definition of distributable net income.
(2) The amount determined under paragraph (1) of this section shall be allocated among the estate or trust and its beneficiaries (including, solely for the purposes of this allocation, resident beneficiaries) in proportion to their respective shares of federal distributable net income. The amounts so allocated shall have the same character as for federal income tax purposes. Where an item entering into the computation of such amounts is not characterized for federal income tax purposes, it shall have the same character as if realized directly from the source from which realized by the estate or trust or incurred in the same manner as if incurred by the estate or trust.
(3) If the estate or trust has no federal distributable net income for the taxable year, the share of each beneficiary in the net amount determined under paragraph (1) of this section shall be in proportion to such beneficiary's share of the estate or trust income distributed in such year. Any balance of such net amount shall be allocated to the estate or trust.