26 U.S.C. § 679 : US Code - Section 679: Foreign trusts having one or more United States beneficiaries

Search 26 U.S.C. § 679 : US Code - Section 679: Foreign trusts having one or more United States beneficiaries

(a) Transferor treated as owner
(1) In general
A United States person who directly or indirectly transfers
property to a foreign trust (other than a trust described in
section 6048(a)(3)(B)(ii)) shall be treated as the owner for his
taxable year of the portion of such trust attributable to such
property if for such year there is a United States beneficiary of
any portion of such trust.
(2) Exceptions
Paragraph (1) shall not apply -
(A) Transfers by reason of death
To any transfer by reason of the death of the transferor.
(B) Transfers at fair market value
To any transfer of property to a trust in exchange for
consideration of at least the fair market value of the
transferred property. For purposes of the preceding sentence,
consideration other than cash shall be taken into account at
its 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
Principal payments by the trust on any obligation referred to
in subparagraph (A) shall be taken into account on and after
the date of the payment in determining the portion of the trust
attributable to the property transferred.
(C) Persons described
The persons described in this subparagraph are -
(i) the trust,
(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
(A) In general
If a nonresident alien individual has a residency starting
date within 5 years after directly or indirectly transferring
property to a foreign trust, this section and section 6048
shall be applied as if such individual transferred to such
trust on the residency starting date an amount equal to the
portion of such trust attributable to the property transferred
by such individual to such trust in such transfer.
(B) Treatment of undistributed income
For purposes of this section, undistributed net income for
periods before such individual's residency starting date shall
be taken into account in determining the portion of the trust
which is attributable to property transferred by such
individual to such trust but shall not otherwise be taken into
account.
(C) Residency starting date
For purposes of this paragraph, an individual's residency
starting date is the residency starting date determined under
section 7701(b)(2)(A).
(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.
(2) Attribution of ownership
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
A beneficiary shall not be treated as a United States person in
applying this section with respect to any transfer of property to
foreign trust if such beneficiary first became a United States
person more than 5 years after the date of such transfer.
(d) Regulations
The Secretary shall prescribe such regulations as may be
necessary or appropriate to carry out the purposes of this section.