Subscribe (Free) to
Daily or Weekly Newsletters
Post a Job

Featured Jobs


Central Pension Fund of the IUOE
(Washington DC)

Central Pension Fund of the IUOE logo

Retirement Plan Consultant

Carpenter Morse Group

Carpenter Morse Group logo

Retirement Plan Administrator

Nicholas Pension Consultants
(Remote / Corona CA / Rancho Cordova CA)

Nicholas Pension Consultants logo

Retirement Plan Legal Specialist

(Remote / West Harrison NY)

Pentegra logo

Distribution \ Loan Clerk

Retirement, LLC
(Remote / Oklahoma City OK)

Retirement, LLC logo

Associate General Counsel

Central Pension Fund of the IUOE
(Washington DC)

Central Pension Fund of the IUOE logo

Jr Retirement Plan Administrator/ Administrative Assistant

Hochheiser Deutsch & Co, Inc.
(Melville NY)

Hochheiser Deutsch & Co, Inc. logo

Enrolled Actuary

Prime Pensions, Inc.

Prime Pensions, Inc. logo

Defined Benefit Calculation Specialist/Actuary

The Angell Pension Group, Inc.
(Remote / East Providence RI)

The Angell Pension Group, Inc. logo

401(k) Distribution Manager

Nova 401(k) Associates

Nova 401(k) Associates logo

Quality Assurance Manager

Bates & Company
(Remote / Winter Park FL)

Bates & Company logo

Retirement Plan Relationship Manager

ERISA Services, Inc.

ERISA Services, Inc. logo

Relationship Manager

Compass Retirement Consulting Group, Inc.
(Remote / NH)

Compass Retirement Consulting Group, Inc. logo

Executive Compensation Lawyer

Trucker Huss, A Professional Corporation
(Remote / San Francisco CA)

Trucker Huss, A Professional Corporation logo

Client Service Manager

United 401(k) Plans, Inc.

United 401(k) Plans, Inc. logo

View More Employee Benefits Jobs

Free Newsletters

“BenefitsLink continues to be the most valuable resource we have at the firm.”

-- An attorney subscriber

Mobile App image LinkedIn icon
Twitter icon
Facebook icon

BenefitsLink > Q&A Columns >

Who's the Employer?

Answers are provided by S. Derrin Watson, JD, APM

Attribution Through Grantor Trust

(Posted May 1, 2002)

Question 167: If a trust owns an corporation, do the attribution rules for purposes of Sections 318 and 1563 depend on whether the trust is a grantor trust? If so, how is a grantor trust determined?

Answer: Yes, they do.

Whether or not a trust is a grantor trust, beneficiaries of that trust are deemed to own their pro rata interest of property held by the trust. (Under IRC 1563, there is no attribution to beneficiaries who have less than a 5% interest, determined according to IRS actuarial tables.)

Additionally, if the trust is a grantor trust, then the deemed owner (usually the grantor or settlor) of the trust is deemed to own all of the trust's property.

The rules relating to grantor trusts are detailed and complex. They are the subject of several weeks of a law school course. Although I will quickly summarize them here, these summaries are no substitute for a thorough understanding of the rules. If in doubt, seek advice from a qualified attorney or CPA on the subject.

IRC 673 says a grantor trust exists when the grantor has a reversionary interest of at least 5% of the value of the trust.

IRC 674 says a grantor trust exists when the grantor or a nonadverse party has the power to control who will receive the income or principal from the trust. There are numerous exclusions. Most "living" trusts are grantor trusts because while the grantor is alive he or she retains the right to determine who will receive trust property after he or she dies.

IRC 675 identifies several "poison" administrative powers which will make a trust into a grantor trust.

IRC 676 says a revocable trust is a grantor trust. Thus, all trusts are grantor trusts while the grantor is alive unless the trust is irrevocable.

IRC 677 says a grantor trust exists if income from the trust is payable to (or held for the benefit of) the grantor or the grantor's spouse, or used to pay for their life insurance.

All these rules apply to make the grantor, the person who set up the trust, the deemed owner of trust property. IRC 678 is different. It applies to make a beneficiary the deemed owner of trust property. If the beneficiary has (or has released) the power to vest trust property in him or herself, that beneficiary can be the deemed owner of the trust.

IRC 679 deals with foreign trusts.

Again, this is just a quick summary to let you know the types of issues involved. It is not a substitute at all for a careful review by a qualified professional.

For examples on how the attribution rules apply in trust situations, including grantor trusts, see Chapters 7 and 14 of my book, Who's the Employer.

Important notice:

Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner or to readers. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of this and similar situations.

The law in this area changes frequently. Answers are believed to be correct as of the posting dates shown. The completeness or accuracy of a particular answer may be affected by changes in the law (statutes, regulations, rulings, court decisions, etc.) that occur after the date on which a particular Q&A is posted.

Copyright 1999-2017 S. Derrin Watson
Related links:

(restricted access)

(restricted access)

© 2023, Inc.