26 U.S.C. § 678 — Person other than grantor treated as sub-

Page 1851 TITLE 26—INTERNAL REVENUE CODE § 679 1969—Subsec. (a)(1) to (3). Pub. L. 91–172, § 332(a)(1), in- serted ‘‘or the grantor’s spouse’’ after ‘‘the grantor’’ in pars. (1), (2), and (3). Subsec. (b). Pub. L. 91–172, § 332(a)(2), inserted ‘‘(other than the grantor’s spouse)’’ after ‘‘beneficiary’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99–514 applicable with respect to transfers in trust made after Mar. 1, 1986, except for transfers pursuant to a certain binding property settle- ment agreement, see section 1402(c) of Pub. L. 99–514, set out as a note under section 673 of this title. EFFECTIVE DATE OF 1969 AMENDMENT Pub. L. 91–172, title III, § 332(b), Dec. 30, 1969, 83 Stat. 599, provided that: ‘‘The amendments made by sub- section (a) [amending this section] shall apply in re- spect of property transferred in trust after October 9, 1969.’’ § 678. Person other than grantor treated as sub- stantial owner (a) General rule A person other than the grantor shall be treat- ed as the owner of any portion of a trust with re- spect to which: (1) such person has a power exercisable sole- ly by himself to vest the corpus or the income therefrom in himself, or (2) such person has previously partially re- leased or otherwise modified such a power and after the release or modification retains such control as would, within the principles of sec- tions 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 provi- sions 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 obli- gated to support or maintain except to the ex- tent 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 con- sidered 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 Notes AMENDMENTS 2000—Subsec. (e). Pub. L. 106–554 substituted ‘‘an S corporation’’ for ‘‘an electing small business corpora- tion’’. 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 Subsidiaries EFFECTIVE DATE OF 1983 AMENDMENT Amendment by Pub. L. 97–448 effective, except as oth- erwise provided, as if it had been included in the provi- sion 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 Ef- fective Date note under section 679 of this title. § 679. Foreign trusts having one or more United States beneficiaries (a) Transferor treated as owner (1) In general A United States person who directly or indi- rectly transfers property to a foreign trust (other than a trust described in section 6048(a)(3)(B)(ii)) shall be treated as the owner for his taxable year of the portion of such trust attributable to such property if for such year there is a United States beneficiary of any portion of such trust. (2) Exceptions Paragraph (1) shall not apply— (A) Transfers by reason of death To any transfer by reason of the death of the transferor. (B) Transfers at fair market value To any transfer of property to a trust in exchange for consideration of at least the fair market value of the transferred prop- erty. For purposes of the preceding sentence, consideration other than cash shall be taken into account at its fair market value. (3) Certain obligations not taken into account under fair market value exception (A) In general In determining whether paragraph (2)(B) applies to any transfer by a person described in clause (ii) or (iii) of subparagraph (C), there shall not be taken into account— (i) except as provided in regulations, any obligation of a person described in sub- paragraph (C), and (ii) to the extent provided in regulations, any obligation which is guaranteed by a person described in subparagraph (C).