Internal Revenue Code:Sec. 678. Person other than grantor treated as substantial owner

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Location in Internal Revenue Code

     TITLE 26 - INTERNAL REVENUE CODE
      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
        

Statute

    Sec. 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).
 

Sources

    (Aug. 16, 1954, ch. 736, 68A Stat. 231; Pub. L. 94-455, title X,
    Sec. 1013(b), Oct. 4, 1976, 90 Stat. 1615; Pub. L. 97-448, title I,
    Sec. 102(i)(2), Jan. 12, 1983, 96 Stat. 2373; Pub. L. 106-554, Sec.
    1(a)(7) (title III, Sec. 319(8)(A)), Dec. 21, 2000, 114 Stat. 2763,
    2763A-646.)
 

Miscellaneous

                                 AMENDMENTS
      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.
 

References

                   SECTION REFERRED TO IN OTHER SECTIONS
      This section is referred to in section 1361 of this title.