[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: 26CFR1.678(a)-1]

[Page 307-308]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.678(a)-1  Person other than grantor treated as substantial owner; 
general rule.

    (a) Where a person other than the grantor of a trust has a power 
exercisable solely by himself to vest the corpus or the income of any 
portion of a testamentary or inter vivos trust in himself, he is treated 
under section 678(a) as the owner of that portion, except as provided in 
section 678(b) (involving taxation of the grantor) and section 678(c) 
(involving and obligation of support). The holder of such a power also 
is treated as an owner of the trust even though he has partially 
released or otherwise modified the power so that he can no longer vest 
the corpus or income in himself, if he has retained such control of the 
trust as would, if retained by a grantor, subject the grantor to 
treatment as the owner under sections 671 to 677, inclusive. See section 
671 and Sec. Sec. 1.671-2 and 1.671-3 for rules for treatment of items 
of income, deduction, and credit where a person is treated as the owner 
of all or only a portion of a trust.

[[Page 308]]

    (b) Section 678(a) treats a person as an owner of a trust if he has 
a power exercisable solely by himself to apply the income or corpus for 
the satisfaction of his legal obligations, other than an obligation to 
support a dependent (see Sec. 1.678(c)-1 subject to the limitation of 
section 678(b). Section 678 does not apply if the power is not 
exercisable solely by himself. However, see Sec. 1.662(a)-4 for 
principles applicable to income of a trust which, pursuant to the terms 
of the trust instrument, is used to satisfy the obligations of a person 
other than the grantor.