§673 — Reversionary interests
27 cases·2 distinguished·25 cited
Statute Text — 26 U.S.C. §673
The grantor shall be treated as the owner of any portion of a trust in which he has a reversionary interest in either the corpus or the income therefrom, if, as of the inception of that portion of the trust, the value of such interest exceeds 5 percent of the value of such portion.
In the case of any beneficiary who—
is a lineal descendant of the grantor, and
holds all of the present interests in any portion of a trust,
the grantor shall not be treated under subsection (a) as the owner of such portion solely by reason of a reversionary interest in such portion which takes effect upon the death of such beneficiary before such beneficiary attains age 21.
For purposes of subsection (a), the value of the grantor’s reversionary interest shall be determined by assuming the maximum exercise of discretion in favor of the grantor.
Any postponement of the date specified for the reacquisition of possession or enjoyment of the reversionary interest shall be treated as a new transfer in trust commencing with the date on which the postponement is effective and terminating with the date prescribed by the postponement. However, income for any period shall not be included in the income of the grantor by reason of the preceding sentence if such income would not be so includible in the absence of such postponement.
27 Citing Cases
at 511-512 (codified as amended at 42 U.S.C. sec. 9902(2), (4) (2012)). 6For health insurance coverage beginning on January 1, 2015, the annual (continued...) -5- Section 36B(d)(2)(A) defines the term "household income" as the MAGI of the taxpayerplus the MAGI offamily members for whom the taxpayerproperly claims deductions for
are treated as grantors ofthe trust. See id. The grantor ofthe trust is taxed on the income ofthe trust underthe grantor trust provisions ifany ofthe following conditions are met: (1) the grantorpossesses a disqualifying reversionary interest, s_e_e sec. 673; (2) specified powers to control beneficial - 32 - [*32] enjoyment ofthe corpus or income are vested in the grantor or certain other persons, gee sec. 674; (3) certain administrative powers are exercisable by the grantor or a nonadverse part
27 (1982) (emphasis added); see also Montana v.
It is within our discretion whether to impose the section 673 penalty.
Second, the trust can be revoked by the grantor or a nonadverse party. Sec. 676. Third, trust income can be distributed to the grantor or the grantor's spouse or be - 17 - used to pay for insurance on their lives without the consent of an adverse party. Sec. 677. Fourth, specified powers to control beneficial enjoyment of the corpus or i
Second, the trust can be revoked by the grantor or a nonadverse party. Sec. 676. Third, trust income can be distributed to the grantor or the grantor's spouse or be - 17 - used to pay for insurance on their lives without the consent of an adverse party. Sec. 677. Fourth, specified powers to control beneficial enjoyment of the corpus or i
Second, the trust can be revoked by the grantor or a nonadverse party. Sec. 676. Third, trust income can be distributed to the grantor or the grantor’s spouse or be used to pay for insurance on their lives without the consent of an adverse party. Sec. 677. Fourth, specified powers - 25 - to control beneficial enjoyment of the corpus or i
Second, the trust can be revoked by the grantor or a nonadverse party. Sec. 676. Third, trust income can be distributed to the grantor or the grantor’s spouse or be used to pay for insurance on their lives without the consent of an adverse party. Sec. 677. Fourth, specified powers - 25 - to control beneficial enjoyment of the corpus or i
Second, the trust can be revoked by the grantor or a nonadverse party. Sec. 676. Third, trust income can be distributed to the grantor or the grantor’s spouse or be used to pay for insurance on their lives without the consent of an adverse party. Sec. 677. Fourth, specified powers - 25 - to control beneficial enjoyment of the corpus or i
(a) Amounts Included.-- (1) In general.--If a foreign corporation is a controlled foreign corporation for an uninterrupted period of 30 days or more during any taxable year, every person who is a United States shareholder (as defined in subsection (b)) of such corporation and who owns (within the meaning of section 958(a)) stock in such corporation on the last day, in such year, on which such corporation is a controlled foreign corporation shall include in his gross income, for his taxable year
er the rules of section 671. Because the conditions imposed by each of the grantor trust provisions are independent of those imposed by the others, the grantor can avoid taxation only if (1) he does not possess a disqualifying reversionary interest, sec. 673, (2) the trust cannot be revoked by the grantor or a nonadverse party, sec. 676, (3) trust income cannot be distributed to the grantor or the grantor’s spouse or be used to pay for insurance on their lives without the consent of an adverse p
er the rules of section 671. Because the conditions imposed by each of the grantor trust provisions are independent of those imposed by the others, the grantor can avoid taxation only if (1) he does not possess a disqualifying reversionary interest (sec. 673), (2) the trust cannot be revoked by the grantor or a nonadverse party (sec. 676), (3) trust income cannot be distributed to the grantor or the grantor’s spouse or used to pay for insurance on their lives without the consent of an adverse pa
er the rules of section 671. Because the conditions imposed by each of the grantor trust provisions are independent of those imposed by the others, the grantor can avoid taxation only if (1) he does not possess a disqualifying reversionary interest, sec. 673, (2) the trust cannot be revoked by the grantor or a nonadverse party, sec. 676, (3) trust income cannot be distributed to the grantor or the grantor’s spouse or be used to pay for insurance on their lives without the consent of an adverse p
er the rules of section 671. Because the conditions imposed by each of the grantor trust provisions are independent of those imposed by the others, the grantor can avoid taxation only if (1) he does not possess a disqualifying reversionary interest, sec. 673, (2) the trust cannot be revoked by the grantor or a nonadverse party, sec. 676, (3) trust income cannot be distributed to the grantor or the grantor’s spouse or be used to pay for insurance on their lives without the consent of an adverse p
er the rules of section 671. Because the conditions imposed by each of the grantor trust provisions are independent of those imposed by the others, the grantor can avoid taxation only if (1) he does not possess a disqualifying reversionary interest, sec. 673; (2) the trust cannot be revoked by the grantor or a nonadverse party, sec. 676; (3) trust income cannot be distributed to the grantor or the grantor’s spouse or be used to pay for insurance on their lives without the consent of an adverse p
er the rules of section 671. Because the conditions imposed by each of the grantor trust provisions are independent of those imposed by the others, the grantor can avoid taxation only if (1) he does not possess a disqualifying reversionary interest, sec. 673, (2) the trust cannot be revoked by the grantor or a nonadverse party, sec. 676, (3) trust income cannot be distributed to the grantor or the grantor’s spouse or be used to pay for insurance on their lives without the consent of an adverse p
This subsection shall not apply to a power the exercise of which can only affect the beneficial enjoyment of the income for a period commencing after the occurrence of an event such that the grantor would not be treated as the owner under section 673 if the power were a reversionary interest; but the grantor may be treated as the owner after the occurrence of the event unless the power is relinquished.