Internal Revenue Code · 26 U.S.C.
§ 672. Definitions and rules
Official text, no changes From the Office of the Law Revision Counsel, release point 119-121 (current through Public Law 119-121 (October 9, 2026)). Compare it with the official text at uscode.house.gov (external site).
Cite as 26 U.S.C. § 672
At a glance
Read from the text, the source credit and the official notes. Not part of the law.
- Status
- In force
- Enacted
- October 22, 1986 by Pub. L. 99–514
- Last amended
- July 22, 1998 by Pub. L. 105–206
- Amendments
- 4 dated changes in the source credit
- Length
- 6 subsections · 907 words · about 4 min to read
- Defines
- 3 terms
- Cross-references
- cites 5; cited by 6 Code sections and 7 other regulations
- Regulations
- 9 issued under this section
For purposes of this subpart, the term “adverse party” means any person having a substantial beneficial interest in the trust which would be adversely affected by the exercise or nonexercise of the power which he possesses respecting the trust. A person having a general power of appointment over the trust property shall be deemed to have a beneficial interest in the trust.
For purposes of this subpart, the term “nonadverse party” means any person who is not an adverse party.
A person shall be considered to have a power described in this subpart even though the exercise of the power is subject to a precedent giving of notice or takes effect only on the expiration of a certain period after the exercise of the power.
For purposes of paragraph (1)(A), an individual legally separated from his spouse under a decree of divorce or of separate maintenance shall not be considered as married.
Notwithstanding any other provision of this subpart, this subpart shall apply only to the extent such application results in an amount (if any) being currently taken into account (directly or through 1 or more entities) under this chapter in computing the income of a citizen or resident of the United States or a domestic corporation.
Except as provided in regulations, paragraph (1) shall not apply to any portion of a trust distributions from which are taxable as compensation for services rendered.
In the case of any transfer directly or indirectly from a partnership or foreign corporation which the transferee treats as a gift or bequest, the Secretary may recharacterize such transfer in such circumstances as the Secretary determines to be appropriate to prevent the avoidance of the purposes of this subsection.
The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection, including regulations providing that paragraph (1) shall not apply in appropriate cases.
(Aug. 16, 1954, ch. 736, 68A Stat. 226; Pub. L. 99–514, title XIV, § 1401(a), Oct. 22, 1986, 100 Stat. 2711; Pub. L. 100–647, title I, § 1014(a)(1), Nov. 10, 1988, 102 Stat. 3559; Pub. L. 101–508, title XI, § 11343(a), Nov. 5, 1990, 104 Stat. 1388–472; Pub. L. 104–188, title I, § 1904(a), Aug. 20, 1996, 110 Stat. 1910; Pub. L. 105–206, title VI, § 6011(c)(1), July 22, 1998, 112 Stat. 818.)
Terms defined here
Where the text says “the term … means”. Select a term to jump to its definition.
Regulations under this section
Treasury regulations (26 CFR) issued under § 672
- § 1.672(a)-1 Definition of adverse party.
- § 1.672(b)-1 Nonadverse party.
- § 1.672(c)-1 Related or subordinate party.
- § 1.672(d)-1 Power subject to condition precedent.
- § 1.672(f)-1 Foreign persons not treated as owners.
- § 1.672(f)-2 Certain foreign corporations.
- § 1.672(f)-3 Exceptions to general rule.
- § 1.672(f)-4 Recharacterization of purported gifts.
- § 1.672(f)-5 Special rules.
Cross-references
Computed from the citations in the text of Title 26 and 26 CFR.
This section cites 5 other sections
- § 674 Power to control beneficial enjoyment
- § 675 Administrative powers
- § 957 Controlled foreign corporations; United States persons
- § 1297 Passive foreign investment company
- § 2503(b) Taxable gifts
Cited by 6 Code sections
- § 645(b)(1) Certain revocable trusts treated as part of estate
- § 665(d)(2) Definitions applicable to subpart D
- § 674(c)(2) Power to control beneficial enjoyment
- § 675(3) Administrative powers
- § 901(b)(5) Taxes of foreign countries and of possessions of United States
- § 2035(e) Adjustments for certain gifts made within 3 years of decedent’s death
Cited in 7 regulations not issued under it
- § 1.641(c)-1 Electing small business trust.
- § 1.645-1 Election by certain revocable trusts to be treated as part of estate.
- § 1.664-1 Charitable remainder trusts.
- § 1.674(c)-1 Excepted powers exercisable only by independent trustees.
- § 1.675-1 Administrative powers.
- § 1.894-1 Income affected by treaty.
- § 301.7701-7 Trusts—domestic and foreign.
Amendment history
From the source credit and the official notes, newest first.
Where it sits in the Code
- Subtitle A Income Taxes
- Chapter 1 NORMAL TAXES AND SURTAXES
- Subchapter J Estates, Trusts, Beneficiaries, and Decedents
- Part I ESTATES, TRUSTS, AND BENEFICIARIES
- Subpart E Grantors and Others Treated as Substantial Owners
Nearby sections
Official notes
Show the Law Revision Counsel's notes (amendments, effective dates)
Editorial Notes
Amendments
1998—Subsec. (f)(3)(B). Pub. L. 105–206 substituted “section 1297” for “section 1296”.
1996—Subsec. (c). Pub. L. 104–188, § 1904(a)(2), inserted “subsection (f) and” before “sections 674” in closing provisions.
Subsec. (f). Pub. L. 104–188, § 1904(a)(1), amended subsec. (f) generally. Prior to amendment, subsec. (f) read as follows: “Special Rule Where Grantor is Foreign Person.—
“(1) In general.—If—
“(A) but for this subsection, a foreign person would be treated as the owner of any portion of a trust, and
“(B) such trust has a beneficiary who is a United States person,
such beneficiary shall be treated as the grantor of such portion to the extent such beneficiary has made transfers of property by gift (directly or indirectly) to such foreign person. For purposes of the preceding sentence, any gift shall not be taken into account to the extent such gift would be excluded from taxable gifts under section 2503(b).
“(2) Regulations.—The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subsection.”
1990—Subsec. (f). Pub. L. 101–508 added subsec. (f).
1988—Subsec. (e). Pub. L. 100–647 amended subsec. (e) generally. Prior to amendment, subsec. (e) read as follows: “For purposes of this subpart, if a grantor’s spouse is living with the grantor at the time of the creation of any power or interest held by such spouse, the grantor shall be treated as holding such power or interest.”
1986—Subsec. (e). Pub. L. 99–514 added subsec. (e).
Statutory Notes and Related Subsidiaries
Effective Date of 1998 Amendment
Amendment by Pub. L. 105–206 effective, except as otherwise provided, as if included in the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105–34, to which such amendment relates, see section 6024 of Pub. L. 105–206, set out as a note under section 1 of this title.
Effective Date of 1996 Amendment
Amendment by Pub. L. 104–188 effective Aug. 20, 1996, with exception for certain trusts, see section 1904(d) of Pub. L. 104–188, set out as a note under section 643 of this title.
Effective Date of 1990 Amendment
Pub. L. 101–508, title XI, § 11343(b), Nov. 5, 1990, 104 Stat. 1388–472, provided that:
“The amendments made by this section [amending this section] shall apply to—“(1) any trust created after the date of the enactment of this Act [Nov. 5, 1990], and“(2) any portion of a trust created on or before such date which is attributable to amounts contributed to the trust after such date.”
Effective Date of 1988 Amendment
Amendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.
Effective Date of 1986 Amendment
Pub. L. 99–514, title XIV, § 1401(b), Oct. 22, 1986, 100 Stat. 2711, provided that: “The amendment made by this section [amending this section] shall apply with respect to transfers in trust made after March 1, 1986.”