Reg. § 1.679-1 U.S. transferor treated as owner of foreign trust.
(a) In general A U.S. transferor who transfers property to a foreign trust is treated as the owner of the portion of the trust attributable to the property transferred if there is a U.S. beneficiary of any portion of the trust, unless an exception in applies to the transfer.
(b) Interaction with sections 673 through 678 The rules of this section apply without regard to whether the U.S. transferor retains any power or interest described in sections through . If a U.S. transferor would be treated as the owner of a portion of a foreign trust pursuant to the rules of this section and another person would be treated as the owner of the same portion of the trust pursuant to section , then the U.S. transferor is treated as the owner and the other person is not treated as the owner.
(c) Definitions The following definitions apply for purposes of this section and through :
(1) U.S. transferor The term U.S. transferor means any U.S. person who makes a transfer (as defined in ) of property to a foreign trust.
(2) U.S. person The term U.S. person means a United States person as defined in section , a nonresident alien individual who elects under section to be treated as a resident of the United States, and an individual who is a dual resident taxpayer within the meaning of .
(3) Foreign trust Section defines the term foreign trust. See also .
(4) Property The term property means any property including cash.
(5) Related person A person is a related person if, without regard to the transfer at issue, the person is—
(i) A grantor of any portion of the trust (within the meaning of );
(ii) An owner of any portion of the trust under sections through ;
(iii) A beneficiary of the trust; or
(iv) A person who is related (within the meaning of section ) to any grantor, owner or beneficiary of the trust.
(6) Obligation The term obligation means any bond, note, debenture, certificate, bill receivable, account receivable, note receivable, open account, or other evidence of indebtedness, and, to the extent not previously described, any annuity contract.
(d) Examples The following examples illustrate the rules of of this section. In these examples, A is a resident alien, B is A's son, who is a resident alien, C is A's father, who is a resident alien, D is A's uncle, who is a nonresident alien, and FT is a foreign trust. The examples are as follows:
Example 1. Interaction with section 678. A creates and funds FT. FT may provide for the education of B by paying for books, tuition, room and board. In addition, C has the power to vest the trust corpus or income in himself within the meaning of section . Under of this section, A is treated as the owner of the portion of FT attributable to the property transferred to FT by A and C is not treated as the owner thereof.
Example 2. U.S. person treated as owner of a portion of FT. D creates and funds FT for the benefit of B. D retains a power described in section and . A transfers property to FT. Under sections and , D is treated as the owner of the portion of FT attributable to the property transferred by D. Under of this section, A is treated as the owner of the portion of FT attributable to the property transferred by A.
[T.D. 8955, 66 FR 37889, July 20, 2001]