26 U.S.C. § 677, Income for benefit of grantor
26 U.S.C. § 677 is an Internal Revenue Code provision issued in the United States Code by the Office of the Law Revision Counsel. The section contains grantor ownership rules and a support exception relevant to a U.S. citizen reading about foreign trusts.
Scope of section 677
Section 677 addresses when a grantor is treated as the owner of a portion of a trust based on how that portion's income may be used. It appears in Title 26, the Internal Revenue Code, within Chapter 1 on normal taxes and surtaxes. The official online text is published by the Office of the Law Revision Counsel, part of the United States Congress.[1]
The general rule applies when the income can be directed without an adverse party's approval or consent. It covers income distributed to the grantor or spouse, accumulated for their future distribution, or used for premiums on life insurance policies covering either of them. The provision excepts policies irrevocably payable for a charitable purpose described in section 170(c).[1]
The rule also addresses powers that affect income only after a specified event. It does not apply to such a power during the period before the event when the grantor would not be treated as owner under section 673 if the power were a reversionary interest. After the event, the grantor may be treated as owner unless the power is relinquished.[1]
A separate subsection concerns trust income used for support or maintenance. Income is not treated as taxable to the grantor merely because it may be applied for a beneficiary, other than the grantor's spouse, whom the grantor has a legal obligation to support. The exception ends to the extent income is actually applied or distributed for that support.[1]
To the extent trust income is applied or distributed for that support, the amount is treated as a distribution under section 661(a)(2) and taxed to the grantor under section 662.[1]
Connection to U.S. trust reporting
For a U.S. citizen connected to a foreign trust, section 677 supplies a rule about grantor ownership for federal income tax purposes. Its text concerns ownership attribution and tax treatment of specified trust income; it does not set out foreign trust filing forms, foreign account reporting, or separate reporting thresholds. This section alone therefore does not identify what forms apply to a particular U.S. citizen.[1]
The official text can be found on the United States Code website maintained by the Office of the Law Revision Counsel. Section 677, titled "Income for benefit of grantor," sits in Title 26.[1]
Questions and answers
What does 26 U.S.C. § 677 address?
It addresses when a grantor is treated as owner of a trust portion based on how the income may be used. Its rule includes income distributed or accumulated for the grantor or spouse, and certain life insurance premiums.[1]
Does the rule include income held for future distribution?
Yes. The general rule includes income accumulated for future distribution to the grantor or the grantor's spouse, subject to the conditions in the section.[1]
How does section 677 address a support obligation?
Income is not treated as taxable to the grantor merely because it may support a beneficiary whom the grantor is legally obligated to maintain. The rule applies only to the extent the income is actually applied or distributed for that support.[1]
Does this section list foreign trust or account forms?
No. The text addresses grantor ownership and tax treatment of trust income. It does not list foreign trust filing forms or foreign account reporting requirements.[1]
Related resources
Related glossary terms
- Section 6048: Section 6048 sets information reporting rules for certain foreign trusts. Its parts cover notice of events, U.S. owner duties and beneficiary distributions.
- Income for the benefit of the grantor: Section 677 treats a grantor as owner of a trust portion when income can benefit the grantor or spouse, including through certain life insurance premiums.
- Section 679: Section 679 addresses certain transfers by U.S. persons to foreign trusts. It treats some property transfers as ownership when the trust has a U.S. beneficiary.
Related articles and guides
- 26 U.S.C. § 679, foreign trusts with U.S. beneficiaries: 26 U.S.C. § 679 sets an ownership rule for foreign trusts with U.S. beneficiaries, defines a U.S. beneficiary and is linked to section 6048 reporting.
- 26 U.S.C. § 674, Power to control beneficial enjoyment: Section 674 treats a grantor as owner of part of a trust when the grantor or another person controls who enjoys principal or income, subject to exceptions.
- Grantor trust rules in sections 671 to 679: A reference for U.S. citizen readers on grantor trust definitions, ownership tests, foreign trust beneficiaries, and statutory links to U.S. reporting rules.
Tools and official documents
- Foreign trust reporting role finder: Tick the roles that describe a connection to a foreign trust or foreign account to see the forms the IRS and FinCEN instructions discuss. Roles can overlap.
Related pages
Sources and data notes
- United States Congress, Office of the Law Revision Counsel, 26 U.S.C. § 677, Income for benefit of grantor. https://uscode.house.gov/us/usc/119-118/t26/s677/. Retrieved .
Dates in this block record when each source was read for this page.