§ 1.684-4. Outbound migrations of domestic trusts.

transfers property which has a fair market value of 1000X and an adjusted basis equal to 400X to T, a domestic trust, for the benefit of A's children who are also U.S. citizens. B is the trustee of T. On January 1, 2001, while A is still alive, B resigns as trustee and C becomes successor trustee under the terms of the trust. Pursuant to § 301.7701-7(d) of this chapter, T becomes a foreign trust. T has U.S. beneficiaries within the meaning of § 1.679-2 and A is, therefore, treated as owning FT under section 679. Pursuant to § 1.684-3(a), neither A nor T is required to recognize gain at the time of the migration. Section 1.684-2(e) provides rules that may require A to recognize gain upon a subsequent change in the status of the trust.

transfers property which has a fair market value of 1000X and an adjusted basis equal to 400X to T, a domestic trust for the benefit of A's mother who is not a citizen or resident of the United States. T is not treated as owned by another person. B is the trustee of T. On January 1, 2001, while A is still alive, B resigns as trustee and C becomes successor trustee under the terms of the trust. Pursuant to § 301.7701-7(d) of this chapter, T becomes a foreign trust, FT. FT has no U.S. beneficiaries within the meaning of § 1.679-2 and no person is treated as owning any portion of FT. T is required to recognize gain of 600X on January 1, 2001. Paragraph (c) of this section provides rules with respect to an inadvertent migration of a domestic trust.