§677 Income for Benefit of Grantor

Summary

Treats the person who made a trust (the grantor) as the owner of any part of the trust when the trust’s income, without needing approval from someone who objects, is or could be: (1) paid to the grantor or the grantor’s spouse; (2) kept for future payment to the grantor or the grantor’s spouse; or (3) used to pay life‑insurance premiums on the grantor or the grantor’s spouse (except policies that must be paid to a charity under section 170(c)). This applies even if section 674 does not already call the grantor the owner. Income is not taxed to the grantor just because someone else (including the trustee or the grantor as trustee) may use it to support a beneficiary the grantor is legally required to support (other than the spouse). The grantor is taxed only on income actually used that way. Amounts paid out of trust principal or out of anything other than income count as a payment under paragraph (2) of section 661(a) and are taxed to the grantor under section 662.