§ 679.
(a)
Transferor treated as owner
(2)
Exceptions
Paragraph (1) shall not apply—
(A)
Transfers by reason of death
(B)
Transfers at fair market value
(3)
Certain obligations not taken into account under fair market value exception
(A)
In general
In determining whether paragraph (2)(B) applies to any transfer by a person described in clause (ii) or (iii) of subparagraph (C), there shall not be taken into account—
(i)
except as provided in regulations, any obligation of a person described in subparagraph (C), and
(ii)
to the extent provided in regulations, any obligation which is guaranteed by a person described in subparagraph (C).
(B)
Treatment of principal payments on obligation
(C)
Persons described
The persons described in this subparagraph are—
(ii)
any grantor, owner, or beneficiary of the trust, and
(iii)
any person who is related (within the meaning of section 643(i)(2)(B)) to any grantor, owner, or beneficiary of the trust.
(4)
Special rules applicable to foreign grantor who later becomes a United States person
(B)
Treatment of undistributed income
(C)
Residency starting date
(5)
Outbound trust migrations
If—
(A)
an individual who is a citizen or resident of the United States transferred property to a trust which was not a foreign trust, and
(B)
such trust becomes a foreign trust while such individual is alive,
then this section and section 6048 shall be applied as if such individual transferred to such trust on the date such trust becomes a foreign trust an amount equal to the portion of such trust attributable to the property previously transferred by such individual to such trust. A rule similar to the rule of paragraph (4)(B) shall apply for purposes of this paragraph.
(b)
Trusts acquiring United States beneficiaries
If—
(1)
subsection (a) applies to a trust for the transferor’s taxable year, and
(2)
subsection (a) would have applied to the trust for his immediately preceding taxable year but for the fact that for such preceding taxable year there was no United States beneficiary for any portion of the trust,
then, for purposes of this subtitle, the transferor shall be treated as having income for the taxable year (in addition to his other income for such year) equal to the undistributed net income (at the close of such immediately preceding taxable year) attributable to the portion of the trust referred to in subsection (a).
(c)
Trusts treated as having a United States beneficiary
(1)
In general
For purposes of this section, a trust shall be treated as having a United States beneficiary for the taxable year unless—
(A)
under the terms of the trust, no part of the income or corpus of the trust may be paid or accumulated during the taxable year to or for the benefit of a United States person, and
(B)
if the trust were terminated at any time during the taxable year, no part of the income or corpus of such trust could be paid to or for the benefit of a United States person.
For purposes of subparagraph (A), an amount shall be treated as accumulated for the benefit of a United States person even if the United States person’s interest in the trust is contingent on a future event.
(2)
For purposes of paragraph (1), an amount shall be treated as paid or accumulated to or for the benefit of a United States person if such amount is paid to or accumulated for a foreign corporation, foreign partnership, or foreign trust or estate, and—
(A)
in the case of a foreign corporation, such corporation is a controlled foreign corporation (as defined in section 957(a)),
(B)
in the case of a foreign partnership, a United States person is a partner of such partnership, or
(C)
in the case of a foreign trust or estate, such trust or estate has a United States beneficiary (within the meaning of paragraph (1)).
(3)
Certain United States beneficiaries disregarded
(4)
Special rule in case of discretion to identify beneficiaries
For purposes of paragraph (1)(A), if any person has the discretion (by authority given in the trust agreement, by power of appointment, or otherwise) of making a distribution from the trust to, or for the benefit of, any person, such trust shall be treated as having a beneficiary who is a United States person unless—
(A)
the terms of the trust specifically identify the class of persons to whom such distributions may be made, and
(B)
none of those persons are United States persons during the taxable year.
(5)
Certain agreements and understandings treated as terms of the trust
(6)
Uncompensated use of trust property treated as a payment
(d)
Presumption that foreign trust has United States beneficiary
If a United States person directly or indirectly transfers property to a foreign trust (other than a trust described in section 6048(a)(3)(B)(ii)), the Secretary may treat such trust as having a United States beneficiary for purposes of applying this section to such transfer unless such person—
(1)
submits such information to the Secretary as the Secretary may require with respect to such transfer, and
(2)
demonstrates to the satisfaction of the Secretary that such trust satisfies the requirements of subparagraphs (A) and (B) of subsection (c)(1).
(Added [Pub. L. 94–455, title X, § 1013(a)], Oct. 4, 1976, [90 Stat. 1614]; amended [Pub. L. 96–603, § 2(b)], Dec. 28, 1980, [94 Stat. 3509]; [Pub. L. 104–188, title I, § 1903(a)]–(f), Aug. 20, 1996, [110 Stat. 1909], 1910; [Pub. L. 105–34, title XVI, § 1601(i)(2)], Aug. 5, 1997, [111 Stat. 1093]; [Pub. L. 105–206, title VI, § 6018(g)], July 22, 1998, [112 Stat. 823]; [Pub. L. 111–147, title V], §§ 531, 532(a), 533(c), Mar. 18, 2010, [124 Stat. 113], 114.)