26 U.S.C. §§ 671–677

7 sections in range

§671. Trust income, deductions, and credits attributable to grantors and others as substantial owners

26 U.S.C. § 671

Where it is specified in this subpart that the grantor or another person shall be treated as the owner of any portion of a trust, there shall then be included in computing the taxable income and credits of the grantor or the other person those items of income, deductions, and credits against tax of the trust which are attributable to that portion of the trust to the extent that such items would be taken into account under this chapter in computing taxable income or credits against the tax of an individual. Any remaining portion of the trust shall be subject to subparts A through D. No items of a trust shall be included in computing the taxable income and credits of the grantor or of any other person solely on the grounds of his dominion and control over the trust under section 61 (relating to definition of gross income) or any other provision of this title, except as specified in this subpart.

Notes, amendments, and revision history

(Aug. 16, 1954, ch. 736, 68A Stat. 226.)

Statutory Notes and Related Subsidiaries

Certain Entities Not Treated as Corporations

Pub. L. 99–514, title VI, § 646, Oct. 22, 1986, 100 Stat. 2292, as amended by Pub. L. 100–647, title I, § 1006(k), Nov. 10, 1988, 102 Stat. 3411, provided that: General Rule.—For purposes of the Internal Revenue Code of 1986, if the entity described in subsection (b) makes an election under subsection (c), such entity shall be treated as a trust to which subpart E of part 1 of subchapter J of chapter 1 of such Code applies. Entity.—An entity is described in this subsection if— such entity was created in 1906 as a common law trust and is governed by the trust laws of the State of Minnesota, such entity is exclusively engaged in the leasing of mineral property and activities incidental thereto, and income interests in such entity are publicly traded as of October 22, 1986, on a national stock exchange.Election.— In general.—An election under this subsection to have the provisions of this section apply— shall be made by the board of trustees of the entity before January 1, 1991, and shall not be valid unless accompanied by an agreement described in paragraph (2).Agreement.— In general.—The agreement described in this paragraph is a written agreement signed by the board of trustees of the entity which provides that the entity will not acquire any additional property other than property described in subparagraph (B). Permissible acquisitions.—Property is described in this paragraph if it is— surface rights to property the acquisition of which— is necessary to mine mineral rights held on October 22, 1986, and is required by a written binding agreement between the entity and an unrelated person entered into on or before October 22, 1986, surface rights to property which are not described in clause (i) and which— are acquired in an exchange to which section 1031 [probably means section 1031 of this title] applies, and are necessary to mine mineral rights held on October 22, 1986, tangible personal property incidental to the leasing of mineral property and activities incidental thereto, or part of any required reserves of the entity. Beginning of period for which election is in effect.—The period during which an election is in effect under this subsection shall begin on the 1st day of the 1st taxable year beginning after the date of the enactment of this Act [Oct. 22, 1986] and following the taxable year in which the election is made. Manner of election.—Any election under this subsection shall be made in such manner as the Secretary of the Treasury or his delegate may prescribe.Special Rules for Taxation of Trust.— Election treated as a liquidation.—If an election is made under subsection (c) with respect to any entity— such entity shall be treated as having been liquidated into a trust immediately before the period described in subsection (c)(3) in a liquidation to which section 333 of the Internal Revenue Code of 1954 (as in effect before the amendments made by this Act) applies, and for purposes of section 333 of such Code (as so in effect)— any person holding an income interest in such entity as of such time shall be treated as a qualified electing shareholder, and the earnings and profits, and the value of money or stock or securities, of such entity shall be apportioned ratably among persons described in clause (i).The amendments made by subtitle D of this title [subtitle D (§§ 631–634) of title VI of Pub. L. 99–514, see Tables for classification] and section 1804 of this Act [see Tables for classification] shall not apply to any liquidation under this paragraph. Termination of election.—If an entity ceases to be described in subsection (b) or violates any term of the agreement described in subsection (c)(2), the entity shall, for purposes of the Internal Revenue Code of 1986, be treated as a corporation for the taxable year in which such cessation or violation occurs and for all subsequent taxable years. Trust ceasing to exist.—Paragraph (2) shall not apply if the trust ceases to be described in subsection (b) or violates the agreement in subsection (c)(2) because the trust ceases to exist. Special Rule for Persons Holding Income Interests.—In applying subpart E of part I of subchapter J of chapter 1 of the Internal Revenue Code of 1986 to any entity to which this section applies— a reversionary interest shall not be taken into account until it comes into possession, and all items of income, gain, loss, deduction, and credit shall be allocated to persons holding income interests for the period of the allocation.”

§672. Definitions and rules

26 U.S.C. § 672

(a)

Adverse party— For purposes of this subpart, the term “adverse party” means any person having a substantial beneficial interest in the trust which would be adversely affected by the exercise or nonexercise of the power which he possesses respecting the trust. A person having a general power of appointment over the trust property shall be deemed to have a beneficial interest in the trust.

(b)

Nonadverse party— For purposes of this subpart, the term “nonadverse party” means any person who is not an adverse party.

(c)

Related or subordinate party— For purposes of this subpart, the term “related or subordinate party” means any nonadverse party who is—

(1)

the grantor’s spouse if living with the grantor;

(2)

any one of the following: The grantor’s father, mother, issue, brother or sister; an employee of the grantor; a corporation or any employee of a corporation in which the stock holdings of the grantor and the trust are significant from the viewpoint of voting control; a subordinate employee of a corporation in which the grantor is an executive.

For purposes of subsection (f) and sections 674 and 675, a related or subordinate party shall be presumed to be subservient to the grantor in respect of the exercise or nonexercise of the powers conferred on him unless such party is shown not to be subservient by a preponderance of the evidence.

(d)

Rule where power is subject to condition precedent— A person shall be considered to have a power described in this subpart even though the exercise of the power is subject to a precedent giving of notice or takes effect only on the expiration of a certain period after the exercise of the power.

(e)

Grantor treated as holding any power or interest of grantor’s spouse—

(1)

In general— For purposes of this subpart, a grantor shall be treated as holding any power or interest held by—

(A)

any individual who was the spouse of the grantor at the time of the creation of such power or interest, or

(B)

any individual who became the spouse of the grantor after the creation of such power or interest, but only with respect to periods after such individual became the spouse of the grantor.

(2)

Marital status— For purposes of paragraph (1)(A), an individual legally separated from his spouse under a decree of divorce or of separate maintenance shall not be considered as married.

(f)

Subpart not to result in foreign ownership—

(1)

In general— Notwithstanding any other provision of this subpart, this subpart shall apply only to the extent such application results in an amount (if any) being currently taken into account (directly or through 1 or more entities) under this chapter in computing the income of a citizen or resident of the United States or a domestic corporation.

(2)

Exceptions—

(A)

Certain revocable and irrevocable trusts— Paragraph (1) shall not apply to any portion of a trust if—

(i)

the power to revest absolutely in the grantor title to the trust property to which such portion is attributable is exercisable solely by the grantor without the approval or consent of any other person or with the consent of a related or subordinate party who is subservient to the grantor, or

(ii)

the only amounts distributable from such portion (whether income or corpus) during the lifetime of the grantor are amounts distributable to the grantor or the spouse of the grantor.

(B)

Compensatory trusts— Except as provided in regulations, paragraph (1) shall not apply to any portion of a trust distributions from which are taxable as compensation for services rendered.

(3)

Special rules— Except as otherwise provided in regulations prescribed by the Secretary—

(A)

a controlled foreign corporation (as defined in section 957) shall be treated as a domestic corporation for purposes of paragraph (1), and

(B)

paragraph (1) shall not apply for purposes of applying section 1297.

(4)

Recharacterization of purported gifts— In the case of any transfer directly or indirectly from a partnership or foreign corporation which the transferee treats as a gift or bequest, the Secretary may recharacterize such transfer in such circumstances as the Secretary determines to be appropriate to prevent the avoidance of the purposes of this subsection.

(5)

Special rule where grantor is foreign person— If—

(A)

but for this subsection, a foreign person would be treated as the owner of any portion of a trust, and

(B)

such trust has a beneficiary who is a United States person,

such beneficiary shall be treated as the grantor of such portion to the extent such beneficiary has made (directly or indirectly) transfers of property (other than in a sale for full and adequate consideration) to such foreign person. For purposes of the preceding sentence, any gift shall not be taken into account to the extent such gift would be excluded from taxable gifts under section 2503(b).

(6)

Regulations— The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection, including regulations providing that paragraph (1) shall not apply in appropriate cases.

Notes, amendments, and revision history

(Aug. 16, 1954, ch. 736, 68A Stat. 226; Pub. L. 99–514, title XIV, § 1401(a), Oct. 22, 1986, 100 Stat. 2711; Pub. L. 100–647, title I, § 1014(a)(1), Nov. 10, 1988, 102 Stat. 3559; Pub. L. 101–508, title XI, § 11343(a), Nov. 5, 1990, 104 Stat. 1388–472; Pub. L. 104–188, title I, § 1904(a), Aug. 20, 1996, 110 Stat. 1910; Pub. L. 105–206, title VI, § 6011(c)(1), July 22, 1998, 112 Stat. 818.)

Editorial Notes

Amendments

1998—Subsec. (f)(3)(B). Pub. L. 105–206 substituted “section 1297” for “section 1296”.

1996—Subsec. (c). Pub. L. 104–188, § 1904(a)(2), inserted “subsection (f) and” before “sections 674” in closing provisions.

Subsec. (f). Pub. L. 104–188, § 1904(a)(1), amended subsec. (f) generally. Prior to amendment, subsec. (f) read as follows: “Special Rule Where Grantor is Foreign Person.—

“(1) In general.—If—

“(A) but for this subsection, a foreign person would be treated as the owner of any portion of a trust, and

“(B) such trust has a beneficiary who is a United States person,

such beneficiary shall be treated as the grantor of such portion to the extent such beneficiary has made transfers of property by gift (directly or indirectly) to such foreign person. For purposes of the preceding sentence, any gift shall not be taken into account to the extent such gift would be excluded from taxable gifts under section 2503(b).

“(2) Regulations.—The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subsection.”

1990—Subsec. (f). Pub. L. 101–508 added subsec. (f).

1988—Subsec. (e). Pub. L. 100–647 amended subsec. (e) generally. Prior to amendment, subsec. (e) read as follows: “For purposes of this subpart, if a grantor’s spouse is living with the grantor at the time of the creation of any power or interest held by such spouse, the grantor shall be treated as holding such power or interest.”

1986—Subsec. (e). Pub. L. 99–514 added subsec. (e).

Statutory Notes and Related Subsidiaries

Effective Date of 1998 Amendment

Amendment by Pub. L. 105–206 effective, except as otherwise provided, as if included in the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105–34, to which such amendment relates, see section 6024 of Pub. L. 105–206, set out as a note under section 1 of this title.

Effective Date of 1996 Amendment

Amendment by Pub. L. 104–188 effective Aug. 20, 1996, with exception for certain trusts, see section 1904(d) of Pub. L. 104–188, set out as a note under section 643 of this title.

Effective Date of 1990 Amendment

Pub. L. 101–508, title XI, § 11343(b), Nov. 5, 1990, 104 Stat. 1388–472, provided that: “The amendments made by this section [amending this section] shall apply to— any trust created after the date of the enactment of this Act [Nov. 5, 1990], and any portion of a trust created on or before such date which is attributable to amounts contributed to the trust after such date.”

Effective Date of 1988 Amendment

Amendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.

Effective Date of 1986 Amendment

Pub. L. 99–514, title XIV, § 1401(b), Oct. 22, 1986, 100 Stat. 2711, provided that: “The amendment made by this section [amending this section] shall apply with respect to transfers in trust made after March 1, 1986.”

§673. Reversionary interests

26 U.S.C. § 673

(a)

General rule— The grantor shall be treated as the owner of any portion of a trust in which he has a reversionary interest in either the corpus or the income therefrom, if, as of the inception of that portion of the trust, the value of such interest exceeds 5 percent of the value of such portion.

(b)

Reversionary interest taking effect at death of minor lineal descendant beneficiary— In the case of any beneficiary who—

(1)

is a lineal descendant of the grantor, and

(2)

holds all of the present interests in any portion of a trust,

the grantor shall not be treated under subsection (a) as the owner of such portion solely by reason of a reversionary interest in such portion which takes effect upon the death of such beneficiary before such beneficiary attains age 21.

(c)

Special rule for determining value of reversionary interest— For purposes of subsection (a), the value of the grantor’s reversionary interest shall be determined by assuming the maximum exercise of discretion in favor of the grantor.

(d)

Postponement of date specified for reacquisition— Any postponement of the date specified for the reacquisition of possession or enjoyment of the reversionary interest shall be treated as a new transfer in trust commencing with the date on which the postponement is effective and terminating with the date prescribed by the postponement. However, income for any period shall not be included in the income of the grantor by reason of the preceding sentence if such income would not be so includible in the absence of such postponement.

Notes, amendments, and revision history

(Aug. 16, 1954, ch. 736, 68A Stat. 227; Pub. L. 91–172, title II, § 201(c), Dec. 30, 1969, 83 Stat. 560; Pub. L. 99–514, title XIV, § 1402(a), Oct. 22, 1986, 100 Stat. 2711; Pub. L. 100–647, title I, § 1014(b), Nov. 10, 1988, 102 Stat. 3559.)

Editorial Notes

Amendments

1988—Subsecs. (c), (d). Pub. L. 100–647 added subsecs. (c) and (d).

1986—Pub. L. 99–514 amended section generally, substituting “the value of such interest exceeds 5 percent of the value of such portion” for “the interest will or may reasonably be expected to take effect in possession or enjoyment within 10 years commencing with the date of the transfer of that portion of the trust” in subsec. (a), adding subsec. (b), striking out subsec. (c) which provided that the grantor not be treated under subsec. (a) as the owner of any portion of a trust where his reversionary interest in such portion was not to take effect in possession or enjoyment until the death of the persons to whom the income therefrom was payable, and subsec. (d) which provided that any postponement of the date specified for the reacquisition of possession or enjoyment of the reversionary interest be treated as a new transfer in trust commencing with the date on which the postponement was effected and terminating with the date prescribed by the postponement.

1969—Subsec. (b). Pub. L. 91–172 struck out provisions relating to trusts where the income was payable to a charitable beneficiary for at least a two-year period.

Statutory Notes and Related Subsidiaries

Effective Date of 1988 Amendment

Effective Date of 1986 Amendment

Pub. L. 99–514, title XIV, § 1402(c), Oct. 22, 1986, 100 Stat. 2712, provided that: In general.—Except as provided in paragraph (2), the amendments made by this section [amending this section and sections 674, 676, and 677 of this title] shall apply with respect to transfers in trust made after March 1, 1986. Transfers pursuant to property settlement agreement.—The amendments made by this section shall not apply to any transfer in trust made after March 1, 1986, pursuant to a binding property settlement agreement entered into on or before March 1, 1986, which required the taxpayer to establish a grantor trust and for the transfer of a specified sum of money or property to the trust by the taxpayer. This paragraph shall apply only to the extent of the amount required to be transferred under the agreement described in the preceding sentence.”

Effective Date of 1969 Amendment

Amendment by Pub. L. 91–172 applicable to transfers in trust made after April 22, 1969, see section 201(g)(3) of Pub. L. 91–172, set out as a note under section 170 of this title.

§674. Power to control beneficial enjoyment

26 U.S.C. § 674

(a)

General rule— The grantor shall be treated as the owner of any portion of a trust in respect of which the beneficial enjoyment of the corpus or the income therefrom is subject to a power of disposition, exercisable by the grantor or a nonadverse party, or both, without the approval or consent of any adverse party.

(b)

Exceptions for certain powers— Subsection (a) shall not apply to the following powers regardless of by whom held:

(1)

Power to apply income to support of a dependent— A power described in section 677(b) to the extent that the grantor would not be subject to tax under that section.

(2)

Power affecting beneficial enjoyment only after occurrence of event— A power, the exercise of which can only affect the beneficial enjoyment of the income for a period commencing after the occurrence of an event such that a grantor would not be treated as the owner under section 673 if the power were a reversionary interest; but the grantor may be treated as the owner after the occurrence of the event unless the power is relinquished.

(3)

Power exercisable only by will— A power exercisable only by will, other than a power in the grantor to appoint by will the income of the trust where the income is accumulated for such disposition by the grantor or may be so accumulated in the discretion of the grantor or a nonadverse party, or both, without the approval or consent of any adverse party.

(4)

Power to allocate among charitable beneficiaries— A power to determine the beneficial enjoyment of the corpus or the income therefrom if the corpus or income is irrevocably payable for a purpose specified in section 170(c) (relating to definition of charitable contributions) or to an employee stock ownership plan (as defined in section 4975(e)(7)) in a qualified gratuitous transfer (as defined in section 664(g)(1)).

(5)

Power to distribute corpus— A power to distribute corpus either—

(A)

to or for a beneficiary or beneficiaries or to or for a class of beneficiaries (whether or not income beneficiaries) provided that the power is limited by a reasonably definite standard which is set forth in the trust instrument; or

(B)

to or for any current income beneficiary, provided that the distribution of corpus must be chargeable against the proportionate share of corpus held in trust for the payment of income to the beneficiary as if the corpus constituted a separate trust.

A power does not fall within the powers described in this paragraph if any person has a power to add to the beneficiary or beneficiaries or to a class of beneficiaries designated to receive the income or corpus, except where such action is to provide for after-born or after-adopted children.

(6)

Power to withhold income temporarily— A power to distribute or apply income to or for any current income beneficiary or to accumulate the income for him, provided that any accumulated income must ultimately be payable—

(A)

to the beneficiary from whom distribution or application is withheld, to his estate, or to his appointees (or persons named as alternate takers in default of appointment) provided that such beneficiary possesses a power of appointment which does not exclude from the class of possible appointees any person other than the beneficiary, his estate, his creditors, or the creditors of his estate, or

(B)

on termination of the trust, or in conjunction with a distribution of corpus which is augmented by such accumulated income, to the current income beneficiaries in shares which have been irrevocably specified in the trust instrument.

Accumulated income shall be considered so payable although it is provided that if any beneficiary does not survive a date of distribution which could reasonably have been expected to occur within the beneficiary’s lifetime, the share of the deceased beneficiary is to be paid to his appointees or to one or more designated alternate takers (other than the grantor or the grantor’s estate) whose shares have been irrevocably specified. A power does not fall within the powers described in this paragraph if any person has a power to add to the beneficiary or beneficiaries or to a class of beneficiaries designated to receive the income or corpus except where such action is to provide for after-born or after-adopted children.

(7)

Power to withhold income during disability of a beneficiary— A power exercisable only during—

(A)

the existence of a legal disability of any current income beneficiary, or

(B)

the period during which any income beneficiary shall be under the age of 21 years,

to distribute or apply income to or for such beneficiary or to accumulate and add the income to corpus. A power does not fall within the powers described in this paragraph if any person has a power to add to the beneficiary or beneficiaries or to a class of beneficiaries designated to receive the income or corpus, except where such action is to provide for after-born or after-adopted children.

(8)

Power to allocate between corpus and income— A power to allocate receipts and disbursements as between corpus and income, even though expressed in broad language.

(c)

Exception for certain powers of independent trustees— Subsection (a) shall not apply to a power solely exercisable (without the approval or consent of any other person) by a trustee or trustees, none of whom is the grantor, and no more than half of whom are related or subordinate parties who are subservient to the wishes of the grantor—

(1)

to distribute, apportion, or accumulate income to or for a beneficiary or beneficiaries, or to, for, or within a class of beneficiaries; or

(2)

to pay out corpus to or for a beneficiary or beneficiaries or to or for a class of beneficiaries (whether or not income beneficiaries).

A power does not fall within the powers described in this subsection if any person has a power to add to the beneficiary or beneficiaries or to a class of beneficiaries designated to receive the income or corpus, except where such action is to provide for after-born or after-adopted children. For periods during which an individual is the spouse of the grantor (within the meaning of section 672(e)(2)), any reference in this subsection to the grantor shall be treated as including a reference to such individual.

(d)

Power to allocate income if limited by a standard— Subsection (a) shall not apply to a power solely exercisable (without the approval or consent of any other person) by a trustee or trustees, none of whom is the grantor or spouse living with the grantor, to distribute, apportion, or accumulate income to or for a beneficiary or beneficiaries, or to, for, or within a class of beneficiaries, whether or not the conditions of paragraph (6) or (7) of subsection (b) are satisfied, if such power is limited by a reasonably definite external standard which is set forth in the trust instrument. A power does not fall within the powers described in this subsection if any person has a power to add to the beneficiary or beneficiaries or to a class of beneficiaries designated to receive the income or corpus except where such action is to provide for after-born or after-adopted children.

Notes, amendments, and revision history

(Aug. 16, 1954, ch. 736, 68A Stat. 227; Pub. L. 99–514, title XIV, § 1402(b)(1), Oct. 22, 1986, 100 Stat. 2712; Pub. L. 100–647, title I, § 1014(a)(3), Nov. 10, 1988, 102 Stat. 3559; Pub. L. 105–34, title XV, § 1530(c)(6), Aug. 5, 1997, 111 Stat. 1078.)

Editorial Notes

Amendments

1997—Subsec. (b)(4). Pub. L. 105–34 inserted before period “or to an employee stock ownership plan (as defined in section 4975(e)(7)) in a qualified gratuitous transfer (as defined in section 664(g)(1))”.

1988—Subsec. (c). Pub. L. 100–647 inserted at end “For periods during which an individual is the spouse of the grantor (within the meaning of section 672(e)(2)), any reference in this subsection to the grantor shall be treated as including a reference to such individual.”

1986—Subsec. (b)(2). Pub. L. 99–514 substituted “occurrence of event” for “expiration of 10-year period” in heading and in text substituted “the occurrence of an event” for “the expiration of a period” and “the occurrence of the event” for “the expiration of the period”.

Statutory Notes and Related Subsidiaries

Effective Date of 1997 Amendment

Amendment by Pub. L. 105–34 applicable to transfers made by trusts to, or for the use of, an employee stock ownership plan after Aug. 5, 1997, see section 1530(d) of Pub. L. 105–34, set out as a note under section 401 of this title.

Effective Date of 1988 Amendment

Effective Date of 1986 Amendment

Amendment by Pub. L. 99–514 applicable with respect to transfers in trust made after Mar. 1, 1986, except for transfers pursuant to a certain binding property settlement agreement, see section 1402(c) of Pub. L. 99–514, set out as a note under section 673 of this title.

§675. Administrative powers

26 U.S.C. § 675

The grantor shall be treated as the owner of any portion of a trust in respect of which—

(1)

Power to deal for less than adequate and full consideration— A power exercisable by the grantor or a nonadverse party, or both, without the approval or consent of any adverse party enables the grantor or any person to purchase, exchange, or otherwise deal with or dispose of the corpus or the income therefrom for less than an adequate consideration in money or money’s worth.

(2)

Power to borrow without adequate interest or security— A power exercisable by the grantor or a nonadverse party, or both, enables the grantor to borrow the corpus or income, directly or indirectly, without adequate interest or without adequate security except where a trustee (other than the grantor) is authorized under a general lending power to make loans to any person without regard to interest or security.

(3)

Borrowing of the trust funds— The grantor has directly or indirectly borrowed the corpus or income and has not completely repaid the loan, including any interest, before the beginning of the taxable year. The preceding sentence shall not apply to a loan which provides for adequate interest and adequate security, if such loan is made by a trustee other than the grantor and other than a related or subordinate trustee subservient to the grantor. For periods during which an individual is the spouse of the grantor (within the meaning of section 672(e)(2)), any reference in this paragraph to the grantor shall be treated as including a reference to such individual.

(4)

General powers of administration— A power of administration is exercisable in a nonfiduciary capacity by any person without the approval or consent of any person in a fiduciary capacity. For purposes of this paragraph, the term “power of administration” means any one or more of the following powers: (A) a power to vote or direct the voting of stock or other securities of a corporation in which the holdings of the grantor and the trust are significant from the viewpoint of voting control; (B) a power to control the investment of the trust funds either by directing investments or reinvestments, or by vetoing proposed investments or reinvestments, to the extent that the trust funds consist of stocks or securities of corporations in which the holdings of the grantor and the trust are significant from the viewpoint of voting control; or (C) a power to reacquire the trust corpus by substituting other property of an equivalent value.

Notes, amendments, and revision history

(Aug. 16, 1954, ch. 736, 68A Stat. 229; Pub. L. 100–647, title I, § 1014(a)(2), Nov. 10, 1988, 102 Stat. 3559.)

Editorial Notes

Amendments

1988—Par. (3). Pub. L. 100–647 inserted at end “For periods during which an individual is the spouse of the grantor (within the meaning of section 672(e)(2)), any reference in this paragraph to the grantor shall be treated as including a reference to such individual.”

Statutory Notes and Related Subsidiaries

Effective Date of 1988 Amendment

§676. Power to revoke

26 U.S.C. § 676

(a)

General rule— The grantor shall be treated as the owner of any portion of a trust, whether or not he is treated as such owner under any other provision of this part, where at any time the power to revest in the grantor title to such portion is exercisable by the grantor or a non-adverse party, or both.

(b)

Power affecting beneficial enjoyment only after occurrence of event— Subsection (a) shall not apply to a power the exercise of which can only affect the beneficial enjoyment of the income for a period commencing after the occurrence of an event such that a grantor would not be treated as the owner under section 673 if the power were a reversionary interest. But the grantor may be treated as the owner after the occurrence of such event unless the power is relinquished.

Notes, amendments, and revision history

(Aug. 16, 1954, ch. 736, 68A Stat. 230; Pub. L. 99–514, title XIV, § 1402(b)(2), Oct. 22, 1986, 100 Stat. 2712.)

Editorial Notes

Amendments

1986—Subsec. (b)(2). Pub. L. 99–514 substituted “occurrence of event” for “expiration of 10-year period” in heading and in text substituted “the occurrence of an event” for “the expiration of a period” and “the occurrence of such event” for “the expiration of such period”.

Statutory Notes and Related Subsidiaries

Effective Date of 1986 Amendment

§677. Income for benefit of grantor

26 U.S.C. § 677

(a)

General rule— The grantor shall be treated as the owner of any portion of a trust, whether or not he is treated as such owner under section 674, whose income without the approval or consent of any adverse party is, or, in the discretion of the grantor or a nonadverse party, or both, may be—

(1)

distributed to the grantor or the grantor’s spouse;

(2)

held or accumulated for future distribution to the grantor or the grantor’s spouse; or

(3)

applied to the payment of premiums on policies of insurance on the life of the grantor or the grantor’s spouse (except policies of insurance irrevocably payable for a purpose specified in section 170(c) (relating to definition of charitable contributions)).

This subsection shall not apply to a power the exercise of which can only affect the beneficial enjoyment of the income for a period commencing after the occurrence of an event such that the grantor would not be treated as the owner under section 673 if the power were a reversionary interest; but the grantor may be treated as the owner after the occurrence of the event unless the power is relinquished.

(b)

Obligations of support— Income of a trust shall not be considered taxable to the grantor under subsection (a) or any other provision of this chapter merely because such income in the discretion of another person, the trustee, or the grantor acting as trustee or co-trustee, may be applied or distributed for the support or maintenance of a beneficiary (other than the grantor’s spouse) whom the grantor is legally obligated to support or maintain, except to the extent that such income is so applied or distributed. In cases where the amounts so applied or distributed are paid out of corpus or out of other than income for the taxable year, such amounts shall be considered to be an amount paid or credited within the meaning of paragraph (2) of section 661(a) and shall be taxed to the grantor under section 662.

Notes, amendments, and revision history

(Aug. 16, 1954, ch. 736, 68A Stat. 230; Pub. L. 91–172, title III, § 332(a), Dec. 30, 1969, 83 Stat. 599; Pub. L. 99–514, title XIV, § 1402(b)(3), Oct. 22, 1986, 100 Stat. 2712.)

Editorial Notes

Amendments

1986—Subsec. (a). Pub. L. 99–514 substituted “the occurrence of an event” for “the expiration of a period” and “the occurrence of the event” for “the expiration of the period” in last sentence.

1969—Subsec. (a)(1) to (3). Pub. L. 91–172, § 332(a)(1), inserted “or the grantor’s spouse” after “the grantor” in pars. (1), (2), and (3).

Subsec. (b). Pub. L. 91–172, § 332(a)(2), inserted “(other than the grantor’s spouse)” after “beneficiary”.

Statutory Notes and Related Subsidiaries

Effective Date of 1986 Amendment

Effective Date of 1969 Amendment

Pub. L. 91–172, title III, § 332(b), Dec. 30, 1969, 83 Stat. 599, provided that: “The amendments made by subsection (a) [amending this section] shall apply in respect of property transferred in trust after October 9, 1969.”