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Treasury Regulations · 26 CFR

§ 1.672(f)-5. Special rules.

In effect eCFR current as of October 15, 2026

Regulation text, no changes From the eCFR, current as of October 15, 2026. The eCFR is an authoritative but unofficial editorial compilation of the Code of Federal Regulations; the official text is the annual CFR on govinfo. Compare it with this section on ecfr.gov (external site) or the official annual CFR on govinfo (external site).

Regulation under 26 U.S.C. § 672(f)

Cite as 26 CFR § 1.672(f)-5

At a glance

Read from the text and its source citation. Not part of the regulation.

Status
In the current eCFR
Issued
August 10, 1999 by T.D. 8831
Last amended
July 5, 2000 by T.D. 8890
Issued under
26 U.S.C. § 672(f)
Length
501 words · about 2 min to read
Cross-references
cites 3 Code sections and 4 regulations; cited by 1
(a) Transfers by certain beneficiaries to foreign grantor—
(1) In general. If, but for section 672(f)(5), a foreign person would be treated as the owner of any portion of a trust, any United States beneficiary of the trust is treated as the grantor of a portion of the trust to the extent the United States beneficiary directly or indirectly made transfers of property to such foreign person (without regard to whether the United States beneficiary was a United States beneficiary at the time of any transfer) in excess of transfers to the United States beneficiary from the foreign person. The rule of this paragraph (a) does not apply to the extent the United States beneficiary can demonstrate to the satisfaction of the Commissioner that the transfer by the United States beneficiary to the foreign person was wholly unrelated to any transaction involving the trust. For purposes of this paragraph (a), the term property includes cash, and a transfer of property does not include a transfer that is not a gratuitous transfer (within the meaning of § 1.671-2(e)(2)). In addition, a gift is not taken into account to the extent such gift would not be characterized as a taxable gift under section 2503(b). For a definition of United States beneficiary, see section 679.
(2) Examples. The following examples illustrate the rules of this section:
Example 1.

A, a nonresident alien, contributes property to FC, a foreign corporation that is wholly owned by A. FC creates a foreign trust, FT, for the benefit of A and A's children. FT is revocable by FC without the approval or consent of any other person. FC funds FT with the property received from A. A and A's family move to the United States. Under paragraph (a)(1) of this section, A is treated as a grantor of FT. (A may also be treated as an owner of FT under section 679(a)(4).)

Example 2.

B, a United States citizen, makes a gratuitous transfer of $1 million to B's uncle, C, a nonresident alien. C creates a foreign trust, FT, for the benefit of B and B's children. FT is revocable by C without the approval or consent of any other person. C funds FT with the property received from B. Under paragraph (a)(1) of this section, B is treated as a grantor of FT. (B also would be treated as an owner of FT as a result of section 679.)

(b) Entity characterization. Entities generally are characterized under United States tax principles for purposes of §§ 1.672(f)-1 through 1.672(f)-5. See §§ 301.7701-1 through 301.7701-4 of this chapter. However, solely for purposes of § 1.672(f)-4, a transferor that is a wholly owned business entity is treated as a corporation, separate from its single owner.
(c) Effective date. The rules in paragraph (a) of this section are applicable to transfers to trusts on or after August 10, 1999. The rules in paragraph (b) of this section are applicable August 10, 1999.

[T.D. 8831, 64 FR 43280, Aug. 10, 1999, as amended by T.D. 8890, 65 FR 41334, July 5, 2000]

Other regulations under § 672

Cross-references

Computed from the citations in the text of 26 CFR.

Code sections it cites

Regulations it cites

Cited by 1 other regulation

Amendment history

From the source citation at the end of the section, newest first. T.D. is a Treasury decision; FR is the Federal Register.

  1. Amended by T.D. 8890 (65 FR 41334)
  2. Issued by T.D. 8831 (64 FR 43280)

Where it sits in 26 CFR

  1. Subchapter A Income tax
  2. Part 1 Income taxes
  3. Grantors and others treated as substantial owners

Nearby sections