§678 Person Other Than Grantor Treated as Substantial Owner

Summary

Counts a person who is not the grantor as the owner of part of a trust when that person can, by themselves, make the trust principal (corpus) or its income paid to them, or when they once gave up part of that power but still keep enough control that rules in sections 671–677 would treat a grantor as an owner. It does not apply if the grantor or a transferor is already treated as owner under other rules (see section 679). It also does not apply when the power only lets a trustee use income to support someone the holder must support, except for the income actually used. If the power is renounced within a reasonable time after learning about it, it does not apply. Amounts paid from principal or non‑income are treated under section 661(a)(2) and taxed under section 662. For rules about S corporation stock, see section 1361(d).