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Internal Revenue Code · 26 U.S.C.

§ 678. Person other than grantor treated as substantial owner

In force Text current through Public Law 119-121 (October 9, 2026) release point 119-121

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. § 678

At a glance

Read from the text, the source credit and the official notes. Not part of the law.

Status
In force
Enacted
October 4, 1976 by Pub. L. 94–455
Last amended
December 21, 2000 by Pub. L. 106–554
Amendments
2 dated changes in the source credit
Length
5 subsections · 383 words · about 2 min to read
Cross-references
cites 5; cited by 1 Code section and 13 other regulations
Regulations
4 issued under this section
(a) General rule A person other than the grantor shall be treated as the owner of any portion of a trust with respect to which:
(1) such person has a power exercisable solely by himself to vest the corpus or the income therefrom in himself, or
(2) 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.
(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 provisions 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 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.

(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.)

Regulations under this section

Treasury regulations (26 CFR) issued under § 678

Cross-references

Computed from the citations in the text of Title 26 and 26 CFR.

This section cites 5 other sections

Cited by 1 Code section

Cited in 13 regulations not issued under it

Amendment history

From the source credit and the official notes, newest first.

  1. Amended by Pub. L. 106–554Parts changed in 2000: (e)
  2. Amended by Pub. L. 97–448Parts changed in 1983: (e)
  3. Enacted by Pub. L. 94–455Parts changed in 1976: (b)

Where it sits in the Code

  1. Subtitle A Income Taxes
  2. Chapter 1 NORMAL TAXES AND SURTAXES
  3. Subchapter J Estates, Trusts, Beneficiaries, and Decedents
  4. Part I ESTATES, TRUSTS, AND BENEFICIARIES
  5. 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

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.