[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: 26CFR1.682(a)-1]

[Page 324-325]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.682(a)-1  Income of trust in case of divorce, etc.

    (a) In general. (1) Section 682(a) provides rules in certain cases 
for determining the taxability of income of trusts as between spouses 
who are divorced, or who are separated under a decree of separate 
maintenance or a written separation agreement. In such cases, the spouse 
actually entitled to receive payments from the trust is considered the 
beneficiary rather than the spouse in discharge of whose obligations the 
payments are made, except to the extent that the payments are specified 
to be for the support of the obligor spouse's minor children in the 
divorce or separate maintenance decree, the separation agreement or the 
governing trust instrument. For convenience, the beneficiary spouse will 
hereafter in this section and in Sec. 1.682(b)-1 be referred to as the 
``wife'' and the obligor spouse from whom she is divorced or legally 
separated as the ``husband''. (See section 7701(a)(17).) Thus, under 
section 682(a) income of a trust:
    (i) Which is paid, credited, or required to be distributed to the 
wife in a taxable year of the wife, and
    (ii) Which, except for the provisions of section 682, would be 
includible in the gross income of her husband,

is includible in her gross income and is not includible in his gross 
income.
    (2) Section 682(a) does not apply in any case to which section 71 
applies. Although section 682(a) and section 71 seemingly cover some of 
the same situations, there are important differences between them. Thus, 
section 682(a) applies, for example, to a trust created before the 
divorce or separation and not in contemplation of it, while section 71 
applies only if the creation of the trust or payments by a previously 
created trust are in discharge of an obligation imposed upon or assumed 
by the husband (or made specific) under the court order or decree 
divorcing or legally separating the husband and wife, or a written 
instrument incident to the divorce status or legal separation status, or 
a written separation agreement. If section 71 applies, it requires 
inclusion in the wife's income of the full amount of periodic payments 
received attributable to property in

[[Page 325]]

trust (whether or not out of trust income), while, if section 71 does 
not apply, section 682(a) requires amounts paid, credited, or required 
to be distributed to her to be included only to the extent they are 
includible in the taxable income of a trust beneficiary under subparts A 
through D (section 641 and following), part I, subchapter J, chapter 1 
of the Code.
    (3) Section 682(a) is designed to produce uniformity as between 
cases in which, without section 682(a), the income of a so-called 
alimony trust would be taxable to the husband because of his continuing 
obligation to support his wife or former wife, and other cases in which 
the income of a so-called alimony trust is taxable to the wife or former 
wife because of the termination of the husband's obligation. 
Furthermore, section 682(a) taxes trust income to the wife in all cases 
in which the husband would otherwise be taxed not only because of the 
discharge of his alimony obligation but also because of his retention of 
control over the trust income or corpus. Section 682(a) applies whether 
the wife is the beneficiary under the terms of the trust instrument or 
is an assignee of a beneficiary.
    (4) The application of section 682(a) may be illustrated by the 
following examples, in which it is assumed that both the husband and 
wife make their income tax returns on a calendar year basis:

    Example 1. Upon the marriage of H and W, H irrevocably transfers 
property in trust to pay the income to W for her life for support, 
maintenance, and all other expenses. Some years later, W obtains a legal 
separation from H under an order of court. W, relying upon the income 
from the trust payable to her, does not ask for any provision for her 
support and the decree recites that since W is adequately provided for 
by the trust, no further provision is being made for her. Under these 
facts, section 682(a), rather than section 71, is applicable. Under the 
provisions of section 682(a), the income of the trust which becomes 
payable to W after the order of separation is includible in her income 
and is deductible by the trust. No part of the income is includible in 
H's income or deductible by him.
    Example 2. H transfers property in trust for the benefit of W, 
retaining the power to revoke the trust at any time. H, however, 
promises that if he revokes the trust he will transfer to W property in 
the value of $100,000. The transfer in trust and the agreement were not 
incident to divorce, but some years later W divorces H. The court decree 
is silent as to alimony and the trust. After the divorce, income of the 
trust which becomes payable to W is taxable to her, and is not taxable 
to H or deductible by him. If H later terminates the trust and transfers 
$100,000 of property to W, the $100,000 is not income to W nor 
deductible by H.

    (b) Alimony trust income designated for support of minor children. 
Section 682(a) does not require the inclusion in the wife's income of 
trust income which the terms of the divorce or separate maintenance 
decree, separation agreement, or trust instrument fix in terms of an 
amount of money or a portion of the income as a sum which is payable for 
the support of minor children of the husband. The portion of the income 
which is payable for the support of the minor children is includible in 
the husband's income. If in such a case trust income fixed in terms of 
an amount of money is to be paid but a lesser amount becomes payable, 
the trust income is considered to be payable for the support of the 
husband's minor children to the extent of the sum which would be payable 
for their support out of the originally specified amount of trust 
income. This rule is similar to that provided in the case of periodic 
payments under section 71. See Sec. 1.71-1.