26 U.S.C. § 678

Person other than grantor treated as substantial owner

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(a) General ruleA 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.

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.)Editorial NotesAmendments

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”.

Statutory Notes and Related SubsidiariesEffective 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.

Notes of Decisions

Cited in 4 cases, 1960–1989 · leading case: Brown v. United States

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Brown v. United States (1989) ca5 “Even if one or both of the wills of Brown’s parents created trusts that are still in effect — a proposition we find dubious — under 26 U.S.C. § 678 , Brown would be the "substantial owner” because of his power to distribute to himself the income and, if necessary, the corpus of…”

Fannie Koffman v. United States (1962) ca6 “26 U.S.C. § 678 (1958 ed.) Nor do we think that the executor and not the widow should have reported the income for taxation.”

Koffman v. United States (1961) mied “Section 678, 1954 Internal Revenue Code, 26 U.S.C.A. § 678 , deals with such situations.”

Trust No. 3, C. E. And Margaret Brehm, Trustees v. Commissioner of Internal Revenue (1960) ca7 “rust * * * the sum of- — ■ “(1) any amount of income for such taxable year required to be distributed currently (including any amount required to be distributed which may be paid out of income or corpus to the extent such amount is paid out of income for such taxable year); and…”

Annotations are extracted automatically from the opinions in the Syfert caselaw corpus and ranked by authority, recency, and treatment. Dots show Syfertize treatment of the citing case itself.