§675 — Title 26 Internal Revenue Code | U.S. Code

§675 Administrative Powers

Title 26 › Subtitle Subtitle A— Income Taxes › Chapter 1— NORMAL TAXES AND SURTAXES › Subchapter J— Estates, Trusts, Beneficiaries, and Decedents › Part I— ESTATES, TRUSTS, AND BENEFICIARIES › Subpart E— Grantors and Others Treated as Substantial Owners › § 675

Last updated Apr 5, 2026|Official source

Summary

Treat the person who made a trust as its owner if any part of the trust meets one of four things. One, the creator or someone who won’t oppose them can, without needing anyone who could object, buy, swap, or take trust property or income for less than fair value. Two, the creator or a non‑opposing person can borrow trust money without paying proper interest or giving adequate security, except when a trustee (not the creator) is allowed by a general lending power to make loans without regard to interest or security. Three, the creator has actually borrowed trust money and has not fully repaid it by the start of the taxable year, unless the loan had proper interest and security and was made by an independent trustee (not the creator or a trustee controlled by them). Four, someone may act in a management role over the trust (not as a trustee) without needing a trustee’s approval. That covers directing votes of significant corporate stock, controlling or vetoing investments when the creator’s and trust’s holdings give meaningful voting control, or getting trust property back by swapping in equal‑value property. If an individual is the creator’s spouse under section 672(e)(2), references to the creator include that spouse.

Title 26, §675

Internal Revenue Code — Source: USLM XML via OLRC

The grantor shall be treated as the owner of any portion of a trust in respect of which—

(1)A power exercisable by the grantor or a nonadverse party, or both, without the approval or consent of any adverse party enables the grantor or any person to purchase, exchange, or otherwise deal with or dispose of the corpus or the income therefrom for less than an adequate consideration in money or money’s worth.

(2)A power exercisable by the grantor or a nonadverse party, or both, enables the grantor to borrow the corpus or income, directly or indirectly, without adequate interest or without adequate security except where a trustee (other than the grantor) is authorized under a general lending power to make loans to any person without regard to interest or security.

(3)The grantor has directly or indirectly borrowed the corpus or income and has not completely repaid the loan, including any interest, before the beginning of the taxable year. The preceding sentence shall not apply to a loan which provides for adequate interest and adequate security, if such loan is made by a trustee other than the grantor and other than a related or subordinate trustee subservient to the grantor. For periods during which an individual is the spouse of the grantor (within the meaning of section 672(e)(2)), any reference in this paragraph to the grantor shall be treated as including a reference to such individual.

(4)A power of administration is exercisable in a nonfiduciary capacity by any person without the approval or consent of any person in a fiduciary capacity. For purposes of this paragraph, the term “power of administration” means any one or more of the following powers: (A) a power to vote or direct the voting of stock or other securities of a corporation in which the holdings of the grantor and the trust are significant from the viewpoint of voting control; (B) a power to control the investment of the trust funds either by directing investments or reinvestments, or by vetoing proposed investments or reinvestments, to the extent that the trust funds consist of stocks or securities of corporations in which the holdings of the grantor and the trust are significant from the viewpoint of voting control; or (C) a power to reacquire the trust corpus by substituting other property of an equivalent value.

Notes & Related Subsidiaries

Editorial Notes

Amendments

1988—Par. (3). Pub. L. 100–647 inserted at end “For periods during which an individual is the spouse of the grantor (within the meaning of section 672(e)(2)), any reference in this paragraph to the grantor shall be treated as including a reference to such individual.”

Statutory Notes and Related Subsidiaries

Effective Date

of 1988 AmendmentAmendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.