26 U.S.C. § 675

Administrative powers

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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.

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

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 SubsidiariesEffective 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.

Notes of Decisions

Cited in 9 cases, 1961–2009 · leading case: Kanter v. Comm'r, 590 F.3d 410 (7th Cir. 2009).

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Kanter v. Comm'r, 590 F.3d 410 (7th Cir. 2009). · cites it 2× “26 U.S.C. § 675 (3). The STJ considered whether Kanter should be considered the grantor of the BRTs, given that Bea Ritch was named as the trust’s settlor.”

Est. of Burton W. Kanter, Deceased, Joshua S. Kanter, & Naomi Kanter v. Comm'r of Internal Revenue, 337 F.3d 833 (7th Cir. 2003). · cites it 2× “See 26 U.S.C. § 675 (3). B. Analysis 1. Was the allowance of the amendment proper? Kanter’s first argument concerns the Tax Court’s allowance of an amendment of the pleadings to conform to the proof that the alleged deficiency relating to BRT applied to 1986 rather than to 1987.”

Inv. Annuity, Inc. v. Blumenthal, 442 F. Supp. 681 (D.D.C. 1977). “Thus, for example, under 26 U.S.C. § 675 , the grantor of a trust is not considered the owner merely because he exercises plenary control over investment decisions; rather, he is considered the owner if he exercises such investment control where “the trust funds consist of…”

In Re Sonner, 53 B.R. 859 (Bankr. E.D. Va. 1985). “26 U.S.C. §§ 675 , 676, 677. A nonadverse party is any person who is not an adverse party.”

Smith v. United States (In Re Holywell Corp.), 85 B.R. 898 (Bankr. S.D. Florida 1988). “26 U.S.C. §§ 675 and 677. An adverse party is defined as a party which has a substantial beneficial interest in the trust which would be adversely affected by the exercise or non-exercise of its powers regarding the trust.”

Martin v. MacHiz, 251 F. Supp. 381 (D. Maryland 1966). “§ 672 (a), so that taxpayer-husband should be treated, under either 26 U.S.C.A. § 675 or 26 U.S.C.A. § 677 , as the owner of the trust res and taxable on capital gains realized from sales of the res.”

John S. Gurich v. Comm'r of Internal Revenue, 295 F.2d 845 (1st Cir. 1961). “Specifically, it could not be used to permit petitioners to enlarge their power to deal with the trust to permit dealing for less than adequate and full consideration, or otherwise to the detriment of the beneficiaries, which power, if it existed, would impose the tax under…”

Est. Burton Kanter v. CIR (7th Cir. 2003). · cites it 2× “See 26 U.S.C. § 675 (3). B. Analysis 1. Was the allowance of the amendment proper? Kanter’s first argument concerns the Tax Court’s al- lowance of an amendment of the pleadings to conform to the proof that the alleged deficiency relating to BRT ap- plied to 1986 rather than to…”

Joshua Kanter v. CIR (7th Cir. 2009). · cites it 2× “26 U.S.C. § 675 (3). The STJ considered whether Kanter should be con- sidered the grantor of the BRTs, given that Bea Ritch was named as the trust’s settlor.”

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