1. (a) General rule The grantor shall be treated as the owner of any portion of a trust, whether or not he is treated as such owner under section 674, whose income without the approval or consent of any adverse party is, or, in the discretion of the grantor or a nonadverse party, or both, may be—

   1. (1) distributed to the grantor or the grantor’s spouse;
   2. (2) held or accumulated for future distribution to the grantor or the grantor’s spouse; or
   3. (3) applied to the payment of premiums on policies of insurance on the life of the grantor or the grantor’s spouse (except policies of insurance irrevocably payable for a purpose specified in section 170(c) (relating to definition of charitable contributions)).

   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.

2. (b) Obligations of support Income of a trust shall not be considered taxable to the grantor under subsection (a) or any other provision of this chapter merely because such income in the discretion of another person, the trustee, or the grantor acting as trustee or co-trustee, may be applied or distributed for the support or maintenance of a beneficiary (other than the grantor’s spouse) whom the grantor is legally obligated to support or maintain, except to the extent that such income is so applied or distributed. In cases where the amounts so applied or distributed are paid out of corpus or out of other than income for 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 grantor under section 662.

(Aug. 16, 1954, ch. 736, 68A Stat. 230; Pub. L. 91–172, title III, § 332(a), Dec. 30, 1969, 83 Stat. 599; Pub. L. 99–514, title XIV, § 1402(b)(3), Oct. 22, 1986, 100 Stat. 2712.)

Editorial Notes

Amendments

1986—Subsec. (a). Pub. L. 99–514 substituted “the occurrence of an event” for “the expiration of a period” and “the occurrence of the event” for “the expiration of the period” in last sentence.

1969—Subsec. (a)(1) to (3). Pub. L. 91–172, § 332(a)(1), inserted “or the grantor’s spouse” after “the grantor” in pars. (1), (2), and (3).

Subsec. (b). Pub. L. 91–172, § 332(a)(2), inserted “(other than the grantor’s spouse)” after “beneficiary”.

Statutory Notes and Related Subsidiaries

Effective Date of 1986 Amendment

Amendment by Pub. L. 99–514 applicable with respect to transfers in trust made after Mar. 1, 1986, except for transfers pursuant to a certain binding property settlement agreement, see section 1402(c) of Pub. L. 99–514, set out as a note under section 673 of this title.

Effective Date of 1969 Amendment

Pub. L. 91–172, title III, § 332(b), Dec. 30, 1969, 83 Stat. 599, provided that:

“The amendments made by subsection (a) [amending this section] shall apply in respect of property transferred in trust after

October 9, 1969.”