26 U.S.C. § 673 — Reversionary interests

submitted 72 years ago by ch. 736 to r/title-26-INTERNAL-REVENUE-CODE · 261 words · no verdicts yet

in plain englishAI-generated · not legal advice

The grantor is treated as owning a trust portion when the grantor’s reversionary interest is worth more than 5 percent of that portion at its creation. The section provides exceptions and rules for valuing and postponing the reversion.

(a) General rule. The grantor is treated as the owner of a trust portion in which the grantor has a reversionary interest in the principal or income if, when that portion begins, the interest is worth more than 5 percent of the portion’s value. (b) Death of a young lineal descendant. If a beneficiary is the grantor’s lineal descendant and holds all present interests in a trust portion, the grantor is not treated as the owner under subsection (a) solely because of a reversionary interest that takes effect when the beneficiary dies before turning 21. (c) Valuing the reversion. For subsection (a), the value of the grantor’s reversionary interest is determined by assuming that discretion is exercised as much as possible in the grantor’s favor. (d) Postponing reacquisition. Postponing the date when possession or enjoyment of the reversionary interest will be reacquired is treated as a new transfer in trust. The new transfer begins when the postponement takes effect and ends on the date set by the postponement. But income for a period is not included in the grantor’s income because of this rule if it would not have been included without the postponement.

the actual law source: uscode.house.gov ↗public domain

(a) General rule

The grantor shall be treated as the owner of any portion of a trust in which he has a reversionary interest in either the corpus or the income therefrom, if, as of the inception of that portion of the trust, the value of such interest exceeds 5 percent of the value of such portion.

(b) Reversionary interest taking effect at death of minor lineal descendant beneficiary

In the case of any beneficiary who—

(1)

is a lineal descendant of the grantor, and

(2)

holds all of the present interests in any portion of a trust,

the grantor shall not be treated under subsection (a) as the owner of such portion solely by reason of a reversionary interest in such portion which takes effect upon the death of such beneficiary before such beneficiary attains age 21.

For purposes of subsection (a), the value of the grantor’s reversionary interest shall be determined by assuming the maximum exercise of discretion in favor of the grantor.

(d) Postponement of date specified for reacquisition

Any postponement of the date specified for the reacquisition of possession or enjoyment of the reversionary interest shall be treated as a new transfer in trust commencing with the date on which the postponement is effective and terminating with the date prescribed by the postponement. However, income for any period shall not be included in the income of the grantor by reason of the preceding sentence if such income would not be so includible in the absence of such postponement.

Source credit: (Aug. 16, 1954, ch. 736, 68A Stat. 227; Pub. L. 91–172, title II, § 201(c), Dec. 30, 1969, 83 Stat. 560; Pub. L. 99–514, title XIV, § 1402(a), Oct. 22, 1986, 100 Stat. 2711; Pub. L. 100–647, title I, § 1014(b), Nov. 10, 1988, 102 Stat. 3559.)

history & why it existsrecord from the source credit

1954Enacted · Act of Aug. 16, 1954, ch. 736
1969Amended · Pub. L. 91-172 · 83 Stat. 560
1986Amended · Pub. L. 99-514 · 100 Stat. 2711
1988Amended · Pub. L. 100-647 · 102 Stat. 3559

A history note hasn’t been published yet. The record shows enactment by ch. 736 on 1954-08-16.

all 0 arguments · sorted by: best

no arguments yet — make the first case