I.R.C. § 679(a) Transferor Treated As Owner
I.R.C. § 679(a)(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.
I.R.C. § 679(a)(2) Exceptions —
Paragraph (1) shall not apply—
I.R.C. § 679(a)(2)(A) Transfers By Reason Of Death —
To any transfer by reason of the death of the transferor.
I.R.C. § 679(a)(2)(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.
I.R.C. § 679(a)(3) Certain Obligations Not Taken Into Account Under Fair Market
Value Exception
I.R.C. § 679(a)(3)(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.R.C. § 679(a)(3)(A)(i) —
except as provided in regulations,
any obligation of a person described in subparagraph (C), and
I.R.C. § 679(a)(3)(A)(ii) —
to the extent provided in regulations,
any obligation which is guaranteed by a person described in subparagraph
(C).
I.R.C. § 679(a)(3)(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.
I.R.C. § 679(a)(3)(C) Persons Described —
The persons described in this subparagraph are—
I.R.C. § 679(a)(3)(C)(i) —
the trust,
I.R.C. § 679(a)(3)(C)(ii) —
any grantor, owner, or beneficiary
of the trust, and
I.R.C. § 679(a)(3)(C)(iii) —
any person who is related (within
the meaning of section 643(i)(2)(B))
to any grantor, owner, or beneficiary of the trust.
I.R.C. § 679(a)(4) Special Rules Applicable To Foreign Grantor Who Later Becomes
A United States Person
I.R.C. § 679(a)(4)(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.
I.R.C. § 679(a)(4)(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.
I.R.C. § 679(a)(4)(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).
I.R.C. § 679(a)(5) Outbound Trust Migrations —
If—
I.R.C. § 679(a)(5)(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
I.R.C. § 679(a)(5)(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.
I.R.C. § 679(b) Trusts Acquiring United States Beneficiaries —
If—
I.R.C. § 679(b)(1) —
subsection (a) applies to a trust for
the transferor's taxable year, and
I.R.C. § 679(b)(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).
I.R.C. § 679(c) Trusts Treated As Having A United States Beneficiary
I.R.C. § 679(c)(1) In General —
For purposes of this section, a trust shall be treated
as having a United States beneficiary for the taxable year unless—
I.R.C. § 679(c)(1)(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
I.R.C. § 679(c)(1)(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.
I.R.C. § 679(c)(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—
I.R.C. § 679(c)(2)(A) —
in the case of a foreign corporation,
such corporation is a controlled foreign corporation (as defined
in section 957(a)),
I.R.C. § 679(c)(2)(B) —
in the case of a foreign partnership,
a United States person is a partner of such partnership, or
I.R.C. § 679(c)(2)(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)).
I.R.C. § 679(c)(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.
I.R.C. § 679(c)(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—
I.R.C. § 679(c)(4)(A) —
the terms of the trust specifically
identify the class of persons to whom such distributions may be made,
and
I.R.C. § 679(c)(4)(B) —
none of those persons are United States
persons during the taxable year.
I.R.C. § 679(c)(5) Certain Agreements And Understandings Treated As Terms Of The
Trust —
For purposes of paragraph (1)(A), if any United States
person who directly or indirectly transfers property to the trust
is directly or indirectly involved in any agreement or understanding
(whether written, oral, or otherwise) that may result in the income
or corpus of the trust being paid or accumulated to or for the benefit
of a United States person, such agreement or understanding shall be
treated as a term of the trust.
I.R.C. § 679(c)(6) Uncompensated Use Of Trust Property Treated As A Payment —
For purposes of this subsection, a loan of cash or marketable
securities (or the use of any other trust property) directly or indirectly
to or by any United States person (whether or not a beneficiary under
the terms of the trust) shall be treated as paid or accumulated for
the benefit of a United States person. The preceding sentence shall
not apply to the extent that the United States person repays the loan
at a market rate of interest (or pays the fair market value of the
use of such property) within a reasonable period of time.
I.R.C. § 679(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—
I.R.C. § 679(d)(1) —
submits such information to the Secretary
as the Secretary may require with respect to such transfer, and
I.R.C. § 679(d)(2) —
demonstrates to the satisfaction of
the Secretary that such trust satisfies the requirements of subparagraphs
(A) and (B) of subsection (c)(1).
I.R.C. § 679(e) Regulations —
The Secretary shall prescribe such regulations as may
be necessary or appropriate to carry out the purposes of this section.
(Added Pub. L. 94-455,
title X, 1013(a), Oct. 4, 1976, 90 Stat. 1614, and amended Pub. L. 96-603, 2(b), Dec. 28, 1980, 94
Stat. 3509, Pub. L. 104-188,
title I, Sec. 1903, Aug. 20, 1996, 110 Stat. 1755; Pub. L. 105-34, title XVI, Sec. 1601(i)(2),
Aug. 5, 1997, 111 Stat 788; Pub. L.
111-147, Sec. 531, 532, 533, Mar. 18, 2010, 124 Stat. 71.)
BACKGROUND NOTES
AMENDMENTS
2010 - Subsec. (c)(1). Pub. L. 111-147, Sec. 531(a), amended
par. (1) by adding the sentence at the end.
Subsec. (c)(4). Pub.
L. 111-147, Sec. 531(b), amended subsec. (c) by adding par.
(4).
Subsec. (c)(5). Pub.
L. 111-147, Sec. 531(c), amended subsec. (c) by adding par.
(5).
Subsec. (c)(6). Pub.
L. 111-147, Sec. 533(c), amended subsec. (c) by adding par.
(6).
Subsec. (d)-(e). Pub.
L. 111-147, Sec. 532(a), redesignated subsec. (d) as subsec.
(e) and added a new subsec. (d).
1997 - Subsec. (a)(3)(C). Pub. L. 105-34, Sec. 1601(i)(2),
amended clauses (ii) and (iii) by inserting “, owner,” after “grantor”.
1996 - Subsec. (a)(1). Pub. L. 104-188, Sec. 1903(b),
substituted “section 6048(a)(3)(B)(ii)” for “section 404(a)(4) or
404A”.
Subsec. (a)(2)(B). Pub. L. 104-188, Sec. 1903(a)(1),
amended subpar. (B). Before amendment, subpar. (B) read as follows:
“(B) Transfers where gain is
recognized to transferor
To any sale or exchange of the
property at its fair market value in a transaction in which all of
the gain to the transferor is realized at the time of the transfer
and is recognized either at such time or is returned as provided in
section 453.”
Subsec. (a)(3), (4), and (5). Pub. L. 104-188, Sec. 1903, added pars.
(3), (4), and (5).
Subsec. (c)(2)(A). Pub.
L. 104-188, Sec. 1903(e), amended subpar. (A). Before amendment,
subpar. (A) read as follows:
(A) in the case of a foreign
corporation, more than 50 percent of the total combined voting power
of all classes of stock entitled to vote of such corporation is owned
(within the meaning of section 958(a)) or is considered to be owned
(within the meaning of section 958(b)) by United States shareholders
(as defined in section 951(b)),
Subsec. (c)(3). Pub.
L. 104-188, Sec. 1903(d), added par. (3).
Subsec. (d). Pub.
L. 104-188, Sec. 1903(f), added subsec. (d).
1980--Subsec. (a)(1). Pub. L. 96-603 inserted “Or section 404A"
after “section 404(a)(4)”.
EFFECTIVE DATE OF 2010 AMENDMENTS
Amendments by Sec. 531 of Pub.
L. 111-147 effective on the date of the enactment of this
Act [Enacted: Mar. 18, 2010].
Amendments by Sec. 532 of Pub.
L. 111-147 effective for transfers of property after the
date of the enactment of this Act [Enacted: Mar. 18, 2010].
Amendment by Sec. 533 of Pub.
L. 111-147 effective for loans made, and uses of property,
after the date of the enactment of this Act [Enacted: Mar. 18, 2010].
EFFECTIVE
DATE OF 1997 AMENDMENT
Amendment
by Sec. 1601(i)(2) of Pub. L. 105-34 effective
as if included in the provisions of the Small Business Job Protection
Act of 1996 to which it relates.
EFFECTIVE DATE OF 1996 AMENDMENTS
Amendments by Pub.
L. 104-188, sec. 1903, applicable to transfers of property
after February 6, 1995.
EFFECTIVE DATE OF 1980 AMENDMENT
Amendment by Pub. L. 96-603 applicable
with respect to employer contributions or accruals for taxable years
beginning after Dec. 31, 1979, election to apply amendments retroactively
with respect to foreign subsidiaries, allowance or prior deductions
in case of certain funded branch plans, and time and manner for making
elections, see section 2(e) of Pub. L. 96-603,
set out as an Effective Date note under section 404A of this title.
EFFECTIVE DATE
Section 1013(f)(1) of Pub.
L. 94-455 provided that: “The amendments made by this section
(other than subsection (c)) [enacting this section and amending sections
643, 678, 6048, and 6678 of this title] shall apply to taxable years
ending after December 31, 1975, but only in the case of--
“(A) foreign trusts created
after May 21, 1974, and
“(B) transfers of property to
foreign trusts after May 21, 1974.”
