PRIA, Government Policy, Made Personal

§675 Administrative Powers

Title 26 › 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 Sep 22, 2026|Official source

Summary

Treat the person who set up the trust as its owner when any of these four things happens. (1) The grantor or a friendly person can buy, sell, or otherwise use the trust property or its income for less than a fair price, without needing permission from anyone who could object. (2) The grantor or a friendly person can borrow trust money or property without paying enough interest or giving enough security, except if a trustee (not the grantor) is allowed under a broad lending power to make such loans. (3) The grantor has borrowed trust money or property and still owes it at the start of the tax year, unless the loan had proper interest and security and was made by an independent trustee; if someone is the grantor’s spouse as described in section 672(e)(2), that spouse is treated like the grantor for this rule. (4) Someone can act in a non-fiduciary way to control the trust’s affairs without needing approval from a fiduciary, where “power of administration” means one or more of: (A) controlling votes of company stock when the grantor and trust holdings matter for control, (B) directing or blocking investments when those stocks matter for control, or (C) getting the trust property back by swapping in other property of equal value.

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)Power to deal for less than adequate and full consideration

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)Power to borrow without adequate interest or security

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)Borrowing of the trust funds

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)General powers of administration

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.