Treasury Regulations (26 C.F.R.)
26 CFR § 1.672(f)-5
Special rules.
# (a)
Transfers by certain beneficiaries to foreign grantor—(1) In general. If, but for section 672(f)(5), a foreign person would be treated as the owner of any portion of a trust, any United States beneficiary of the trust is treated as the grantor of a portion of the trust to the extent the United States beneficiary directly or indirectly made transfers of property to such foreign person (without regard to whether the United States beneficiary was a United States beneficiary at the time of any transfer) in excess of transfers to the United States beneficiary from the foreign person. The rule of this paragraph (a) does not apply to the extent the United States beneficiary can demonstrate to the satisfaction of the Commissioner that the transfer by the United States beneficiary to the foreign person was wholly unrelated to any transaction involving the trust. For purposes of this paragraph (a), the term property includes cash, and a transfer of property does not include a transfer that is not a gratuitous transfer (within the meaning of § 1.671-2(e)(2)). In addition, a gift is not taken into account to the extent such gift would not be characterized as a taxable gift under section 2503(b). For a definition of United States beneficiary, see section 679.
(2) Examples. The following examples illustrate the rules of this section:
Example 1.
A, a nonresident alien, contributes property to FC, a foreign corporation that is wholly owned by A. FC creates a foreign trust, FT, for the benefit of A and A's children. FT is revocable by FC without the approval or consent of any other person. FC funds FT with the property received from A. A and A's family move to the United States. Under paragraph (a)(1) of this section, A is treated as a grantor of FT. (A may also be treated as an owner of FT under section 679(a)(4).)
Example 2.
B, a United States citizen, makes a gratuitous transfer of $1 million to B's uncle, C, a nonresident alien. C creates a foreign trust, FT, for the benefit of B and B's children. FT is revocable by C without the approval or consent of any other person. C funds FT with the property received from B. Under paragraph (a)(1) of this section, B is treated as a grantor of FT. (B also would be treated as an owner of FT as a result of section 679.)
# (b) Entity characterization.
Entities generally are characterized under United States tax principles for purposes of §§ 1.672(f)-1 through 1.672(f)-5. See §§ 301.7701-1 through 301.7701-4 of this chapter. However, solely for purposes of § 1.672(f)-4, a transferor that is a wholly owned business entity is treated as a corporation, separate from its single owner.
# (c) Effective date.
The rules in paragraph (a) of this section are applicable to transfers to trusts on or after August 10, 1999. The rules in paragraph (b) of this section are applicable August 10, 1999.
[T.D. 8831, 64 FR 43280, Aug. 10, 1999, as amended by T.D. 8890, 65 FR 41334, July 5, 2000]
Source: view the official text
In this part (40 sections)
- 1.665(b)-2A · Special rules for accumulation distributions made in…
- 1.665(c)-1A · Special rule applicable to distributions by certain…
- 1.665(d)-1A · Taxes imposed on the trust.
- 1.665(e)-1A · Preceding taxable year.
- 1.665(f)-1A · [Reserved]
- 1.665(g)-1A · [Reserved]
- 1.665(g)-2A · Application of separate share rule.
- 1.671-1 · Grantors and others treated as substantial owners; scope.
- 1.671-2 · Applicable principles.
- 1.671-3 · Attribution or inclusion of income, deductions, and credits…
- 1.671-4 · Method of reporting.
- 1.671-5 · Reporting for widely held fixed investment trusts.
- 1.672(a)-1 · Definition of adverse party.
- 1.672(b)-1 · Nonadverse party.
- 1.672(c)-1 · Related or subordinate party.
- 1.672(d)-1 · Power subject to condition precedent.
- 1.672(f)-1 · Foreign persons not treated as owners.
- 1.672(f)-2 · Certain foreign corporations.
- 1.672(f)-3 · Exceptions to general rule.
- 1.672(f)-4 · Recharacterization of purported gifts.
- 1.672(f)-5 · Special rules.
- 1.673(a)-1 · Reversionary interests; income payable to beneficiaries…
- 1.673(b)-1 · Income payable to charitable beneficiaries before…
- 1.673(c)-1 · Reversionary interest after income beneficiary's death.
- 1.673(d)-1 · Postponement of date specified for reacquisition.
- 1.674(a)-1 · Power to control beneficial enjoyment; scope of section…
- 1.674(b)-1 · Excepted powers exercisable by any person.
- 1.674(c)-1 · Excepted powers exercisable only by independent trustees.
- 1.674(d)-1 · Excepted powers exercisable by any trustee other than…
- 1.674(d)-2 · Limitations on exceptions in section 674 (b), (c), and (d).
- 1.675-1 · Administrative powers.
- 1.676(a)-1 · Power to revest title to portion of trust property in…
- 1.676(b)-1 · Powers exercisable only after a period of time.
- 1.677(a)-1 · Income for benefit of grantor; general rule.
- 1.677(b)-1 · Trusts for support.
- 1.678(a)-1 · Person other than grantor treated as substantial owner;…
- 1.678(b)-1 · If grantor is treated as the owner.
- 1.678(c)-1 · Trusts for support.
- 1.678(d)-1 · Renunciation of power.
- 1.679-0 · Outline of major topics.