[Code of Federal Regulations]
[Title 26, Volume 8]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.673(b)-1]

[Page 295-296]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.673(b)-1  Income payable to charitable beneficiaries before 
amendment by Tax Reform Act of 1969).

    (a) Pursuant to section 673(b) a grantor is not treated as an owner 
of any portion of a trust under section 673, even though he has a 
reversionary interest which will take effect within 10 years, to the 
extent that, under the terms of the trust, the income of the portion is 
irrevocably payable for a period of at least 2 years (commencing with 
the date of the transfer) to a designated beneficiary of the type 
described in section 170(b)(1)(A).
    (b) Income must be irrevocably payable to a designated beneficiary 
for at least 2 years commencing with the date

[[Page 296]]

of the transfer before the benefit of section 673(b) will apply. Thus, 
section 673(b) will not apply if income of a trust is irrevocably 
payable to University A for 1 year and then to University B for the next 
year; or if income of a trust may be allocated among two or more 
charitable beneficiaries in the discretion of the trustee or any other 
person. On the other hand, section 673(b) will apply if half the income 
of a trust is irrevocably payable to University A and the other half is 
irrevocably payable to University B for two years.
    (c) Section 673(b) applies to the period of 2 years or longer during 
which income is paid to a designated beneficiary of the type described 
in section 170(b)(1)(A) (i), (ii), or (iii), even though the trust term 
is to extend beyond that period. However, the other provisions of 
section 673 apply to the part of the trust term, if any, that extends 
beyond that period. This paragraph may be illustrated by the following 
example:

    Example. G transfers property in trust with the ordinary income 
payable to University C (which qualifies under section 170(b)(1)(A)(ii)) 
for 3 years, and then to his son, B, for 5 years. At the expiration of 
the term the trust reverts to G. G is not taxed under section 673 of the 
trust income payable to University C for the first 3 years because of 
the application of section 673(b). However, he is taxed on income for 
the next 5 years because he has a reversionary interest which will take 
effect within 10 years commencing with the date of the transfer. On the 
other hand, if the income were payable to University C for 3 years and 
then to R for 7 years so that the trust corpus would not be returned to 
G within 10 years, G would not be taxable under section 673 on income 
payable to University C and to B during any part of the term.

    (d) This section does not apply to transfers in trust made after 
April 22, 1969.

[T.D. 6500, 25 FR 11814, Nov. 26, 1960, as amended by TD, 6605, 27 FR 
8097, Aug. 15, 1962; T.D. 7357, 40 FR 23743, June 2, 1975]