---
kind: "section"
citation: "26 U.S.C. § 673"
title: "26"
title_heading: "Internal Revenue Code"
number: "673"
heading: "Reversionary interests"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/26/673"
units:
  - "Subtitle A — Income Taxes"
  - "Chapter 1 — Normal Taxes and Surtaxes"
  - "Subchapter J — Estates, Trusts, Beneficiaries, and Decedents"
  - "Part I — Estates, Trusts, and Beneficiaries"
  - "Subpart E — Grantors and Others Treated as Substantial Owners"
---

# §673. Reversionary interests

- (a) **General rule—** The grantor shall be treated as the owner of any portion of a trust in which he has a reversionary [interest](/usc/26/856.md?p=f-1) in either the corpus or the income therefrom, if, as of the inception of that portion of the trust, the [value](/usc/26/851.md?p=c-4) of such [interest](/usc/26/856.md?p=f-1) exceeds 5 percent of the [value](/usc/26/851.md?p=c-4) 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](/usc/26/856.md?p=f-1) in any portion of a trust,

  the grantor shall not be treated under [subsection (a)](#a) as the owner of such portion solely by reason of a reversionary [interest](/usc/26/856.md?p=f-1) 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)](#a), the [value](/usc/26/851.md?p=c-4) of the grantor’s reversionary [interest](/usc/26/856.md?p=f-1) 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](/usc/26/856.md?p=f-1) 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.

## Source credit

(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.)

## Notes

### 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

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, § 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.