ExpertMedium1 markMultiple Choice
CPA · Question 43 · Area II: Entity Tax Compliance
Which of the following powers, if retained by the grantor, will cause a trust to be treated as a Grantor Trust for income tax purposes?
Which of the following powers, if retained by the grantor, will cause a trust to be treated as a Grantor Trust for income tax purposes?
Answer options:
A.
Power to distribute corpus to beneficiaries limited by an ascertainable standard.
B.
Power to revoke the trust.
C.
Power to allocate receipts between corpus and income.
D.
Power to use income to support a dependent, but only if actually used.
How to approach this question
Identify 'strings attached'. Revocability is the ultimate string.
Full Answer
B.Power to revoke the trust.✓ Correct
B
IRC §676. The grantor shall be treated as the owner of any portion of a trust where at any time the power to revest in the grantor title to such portion is exercisable by the grantor.
Common mistakes
Confusing administrative powers with substantive control.
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