26 U.S.C. § 678 | Person other than grantor treated as substantial owner

(a)

General rule

A person other than the grantor shall be treated as the owner of any portion of a trust with respect to which:

(1)

such person has a power exercisable solely by himself to vest the corpus or the income therefrom in himself, or

(2)

such person has previously partially released or otherwise modified such a power and after the release or modification retains such control as would, within the principles of sections 671 to 677, inclusive, subject a grantor of a trust to treatment as the owner thereof.

(b)

Exception where grantor is taxable

Subsection (a) shall not apply with respect to a power over income, as originally granted or thereafter modified, if the grantor of the trust or a transferor (to whom section 679 applies) is otherwise treated as the owner under the provisions of this subpart other than this section.

(c)

Obligations of support

Subsection (a) shall not apply to a power which enables such person, in the capacity of trustee or cotrustee, merely to apply the income of the trust to the support or maintenance of a person whom the holder of the power is obligated to support or maintain except to the extent that such income is so applied. In cases where the amounts so applied or distributed are paid out of corpus or out of other than income of 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 holder of the power under section 662.

(d)

Effect of renunciation or disclaimer

Subsection (a) shall not apply with respect to a power which has been renounced or disclaimed within a reasonable time after the holder of the power first became aware of its existence.

(e)

Cross reference

For provision under which beneficiary of trust is treated as owner of the portion of the trust which consists of stock in an S corporation, see section 1361(d).

Aug. 16, 1954, ch. 736 68A Stat. 231 Pub. L. 94–455, title X, § 1013(b)Oct. 4, 197690 Stat. 1615 Pub. L. 97–448, title I, § 102(i)(2)Jan. 12, 198396 Stat. 2373 Pub. L. 106–554, § 1(a)(7) [title III, § 319(8)(A)]Dec. 21, 2000114 Stat. 2763(, ; , , ; , , ; , , , 2763A–646.)

Editorial Notes

Amendments

Pub. L. 106–5542000—Subsec. (e). substituted “an S corporation” for “an electing small business corporation”.

Pub. L. 97–4481983—Subsec. (e). added subsec. (e).

Pub. L. 94–4551976—Subsec. (b). substituted “if the grantor of the trust or a transferor (to whom section 679 applies) is otherwise treated as the owner under the provisions of this subpart other than this section” for “if the grantor of the trust is otherwise treated as the owner under sections 671 to 677, inclusive”.

Statutory Notes and Related Subsidiaries

Effective Date of 1983 Amendment

Pub. L. 97–448 Pub. L. 97–34 section 109 of Pub. L. 97–448 section 1 of this titleAmendment by effective, except as otherwise provided, as if it had been included in the provision of the Economic Recovery Tax Act of 1981, , to which such amendment relates, see , set out as a note under .

Effective Date of 1976 Amendment

Pub. L. 94–455 section 1013(f)(1) of Pub. L. 94–455 section 679 of this titleFor effective date of amendment by , see , set out as an Effective Date note under .