Title 26 — Internal Revenue Code
Part I · Chapter 1 — Normal Taxes and Surtaxes
§ 678. Person other than grantor treated as substantial owner
Statutory text
General rule
A person other than the grantor shall be treated as the owner of any portion of a trust with respect to which:
such person has a power exercisable solely by himself to vest the corpus or the income therefrom in himself, or
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.
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.
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.
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.
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).
Legislative history
Reconstructed from this section’s Code source credit and amendment notes, resolved against the local Statutes at Large. Editorial notes are evidence, not the law that made the change.
Aug. 16, 1954, ch. 736, 68A Stat. 231 · 68A Stat. 231
Enacted · 26 U.S.C. § 678
Aug. 16, 1954, ch. 736, 68A Stat. 231
Source evidence
Code source credit
Aug. 16, 1954, ch. 736, 68A Stat. 231Pub. L. 94–455 title X § 1013(b) · 90 Stat. 1520
Substituted · 26 U.S.C. § 678(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”
Source evidence
Code amendment note
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”.Enacted provision · exact public law section
(b) Grantor To Be Treated as Owner.— Subsection (b) of section 678 (relating to persons other than grantors treated as substantial 26 USC 678. owners) is amended by striking out everything after “modified,” and inserting in lieu thereof “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.”,Pub. L. 97–448 title I § 102(i)(2) · 96 Stat. 2365
Added · 26 U.S.C. § 678(e)
Pub. L. 97–448 added subsec. (e)
Source evidence
Code amendment note
Subsec. (e). Pub. L. 97–448 added subsec. (e).Enacted provision · exact public law section
(2) Section 678 is amended by adding at the end thereof the 26 USC 678. following new subsection: “(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 electing small business corporation, see section 1361(d).”Effective date note
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.Consolidated Appropriations Act, 2001
Pub. L. 106–554 § 1(a)(7)(tIII)(s319)(8)(A) · 114 Stat. 2763
Substituted · 26 U.S.C. § 678(e)
Pub. L. 106–554 substituted “an S corporation” for “an electing small business corporation”
Source evidence
Code amendment note
Subsec. (e). Pub. L. 106–554 substituted “an S corporation” for “an electing small business corporation”.Enacted provision · exact public law section
(7) H.R. 5662, as introduced on December 14, 2000.
3 of 4 references resolved to an enrolled provision · 1 partial
Editorial Notes
Amendments1976–2000 · 3 rounds
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 Subsidiaries
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.
Credits
1954–2000 · 4 acts
- 1954Aug. 16, 1954, ch. 736, 68A Stat. 231
- 1976Pub. L. 94–455, title X, § 1013(b), , 90 Stat. 1615
- 1983Pub. L. 97–448, title I, § 102(i)(2), , 96 Stat. 2373
- 2000Pub. L. 106–554, § 1(a)(7) [title III, § 319(8)(A)], , 114 Stat. 2763, 2763A–646.
Show as published
(Aug. 16, 1954, ch. 736, 68A Stat. 231; Pub. L. 94–455, title X, § 1013(b), , 90 Stat. 1615; Pub. L. 97–448, title I, § 102(i)(2), , 96 Stat. 2373; Pub. L. 106–554, § 1(a)(7) [title III, § 319(8)(A)], , 114 Stat. 2763, 2763A–646.)