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U.S. Code, Title 26, Internal Revenue Code
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General SummaryThe U.S. Code is a consolidation and codification by subject matter of the general and permanent laws of the United States. While every effort has been made to ensure that this reproduction of the Code is accurate, those using it for legal purposes should verify their results against the printed version of the Code available through the Government Printing Office.
§ 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 to 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, 1976, 90 Stat. 1615; Pub. L. 97–448, title I, § 102(i)(2), Jan. 12, 1983, 96 Stat. 2373; Pub. L. 106–554, § 1(a)(7) [title III, § 319(8)(A)], Dec. 21, 2000, 114 Stat. 2763, 2763A–646.)
2000—Subsec. (e). Pub. L. 106–554 substituted "an S corporation" for "an electing small business corporation".
1983—Subsec. (e). Pub. L. 97–448 added subsec. (e).
1976—Subsec. (b). Pub. L. 94–455 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".
Effective Date of 1983 Amendment
Amendment by Pub. L. 97–448 effective, except as otherwise provided, as if it had been included in the provision of the Economic Recovery Tax Act of 1981, Pub. L. 97–34, to which such amendment relates, see section 109 of Pub. L. 97–448, set out as a note under section 1 of this title.
Effective Date of 1976 Amendment
For effective date of amendment by Pub. L. 94–455, see section 1013(f)(1) of Pub. L. 94–455, set out as an Effective Date note under section 679 of this title.
Section Referred to in Other Sections
This section is referred to in section 1361 of this title.
Contents:
Chicago: "U.S. Congress, Office of the Law Revision Counsel", "§ 678. Person Other Than Grantor Treated as Substantial Owner," U.S. Code, Title 26, Internal Revenue Code in U.S. Code, Title 26, Internal Revenue Code (Washington, D.C.: Government Printing Office, 2002), Original Sources, accessed March 15, 2025, http://www.originalsources.com/Document.aspx?DocID=52S3G4MJ1PHJTTL.
MLA: "U.S. Congress, Office of the Law Revision Counsel". "§ 678. Person Other Than Grantor Treated as Substantial Owner." U.S. Code, Title 26, Internal Revenue Code, in U.S. Code, Title 26, Internal Revenue Code, Washington, D.C., Government Printing Office, 2002, Original Sources. 15 Mar. 2025. http://www.originalsources.com/Document.aspx?DocID=52S3G4MJ1PHJTTL.
Harvard: "U.S. Congress, Office of the Law Revision Counsel", '§ 678. Person Other Than Grantor Treated as Substantial Owner' in U.S. Code, Title 26, Internal Revenue Code. cited in 2002, U.S. Code, Title 26, Internal Revenue Code, Government Printing Office, Washington, D.C.. Original Sources, retrieved 15 March 2025, from http://www.originalsources.com/Document.aspx?DocID=52S3G4MJ1PHJTTL.
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