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TITLE 26-INTERNAL REVENUE CODE (Added Pub. L. 94-455, title X, § 1014(b), Oct. 4, 1976, 90 Stat. 1617.) PRIOR PROVISIONS A prior section 668, acts Aug. 16, 1954, ch. 736, 68A Stat. 225; Oct. 16, 1962, Pub. L. 87-834, § 7(d), 76 Stat. 986; Dec. 30, 1969, Pub. L. 91-172, title III, § 33 1(a), 83 Stat. 594, which related to treatment of amounts deemed distributed in preceding years, was repealed by Pub. L. 94-455, title VII, § 701(a)(3), Oct. 4, 1976, 90 Stat. 1577. See section 667 of this title. EFrECTIVE DATE Section 1014(d) of Pub. L. 94-455 provided that: "The amendments made by this section [enacting this section and amending section 667(a) of this title] shall apply to taxable years beginning after December 31, 1976." SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 667 of this title. [§ 669. Repealed. Pub. L. 94-455, title VII, § 701(d)(1), Oct. 4, 1976, 90 Stat. 1578] Section, acts Oct. 16, 1962, Pub. L. 87-834, § 7(e), 76 Stat. 986; Dec. 30, 1969, Pub. L. 91-172, title III, § 331(a), 83 Stat. 596, related to the treatment of cap- ital gain deemed distributed in preceding years. EFFECTIVE DATE OF REPEIAL Repeal of section applicable to distributions made in taxable years beginning after Dec. 31, 1975, see section 701(h) of Pub. L. 94-455, set out as an Effective Date of 1976 Amendment note under section 667 of this title. SUBPART E-GRANTORS AND OTHERS TREATED AS SUBSTANTIAL OWNERS Sec. 671. Trust income, deductions, and credits attribut- able to grantors and others as substantial owners. 672. Definitions and rules. 673. Reversionary interests. 674. Power to control beneficial enjoyment. 675. Administrative powers. 676. Power to revoke. 677. Income for benefit of grantor. 678. Person other than grantor treated as substantial owner. 679. Foreign trusts having one or more United States beneficiaries. AMENDMENTS 1976-Pub. L. 94-455, title X, § 1013(e)(1), Oct. 4, 1976, 90 Stat. 1616, added item 679. SUBPART REFERRED TO IN OTHER SECTIONS This subpart is referred to in sections 402, 1371 of this title. § 671. Trust income, deductions, and credits attribut- able to grantors and others as substantial owners Where it is specified in this subpart that the grantor or another person shall be treated as the owner of any portion of a trust, there shall then be included in computing the taxable income and credits of the grantor or the other person those items of income, deductions, and credits against tax of the trust which are attrib- utable to that portion of the trust to the extent that such items would be taken into account under this chapter in computing taxable income or credits against the tax of an individ- ual. Any remaining portion of the trust shall be subject to subparts A through D. No items of a trust shall be included in computing the tax- able income and credits of the grantor or of any other person solely on the grounds of his do- minion and control over the trust under section 61 (relating to definition of gross income) or any other provision of this title, except as speci- fied in this subpart. (Aug. 16, 1954, ch. 736, 68A Stat. 226.) SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 170, 678 of this title. § 672. Definitions and rules (a) Adverse party For purposes of this subpart, the term "ad- verse party" means any person having a sub- stantial beneficial interest in the trust which would be adversely affected by the exercise or nonexercise of the power which he possesses re- specting the trust. A person having a general power of appointment over the trust property shall be deemed to have a beneficial interest in the trust. (b) Nonadverse party For purposes of this subpart, the term "non- adverse party" means any person who is not an adverse party. (c) Related or subordinate party For purposes of this subpart, the term "relat- ed or subordinate party" means any nonadverse party who is- (1) the grantor's spouse if living with the grantor; (2) any one of the following: The grantor's father, mother, issue, brother or sister; an employee of the grantor; a corporation or any employee of a corporation in which the stock holdings of the grantor and the trust are sig- nificant from the viewpoint of voting control; a subordinate employee of a corporation in which the grantor is an executive. For purposes of sections 674 and 675, a related or subordinate party shall be presumed to be subservient to the grantor in respect of the ex- ercise or nonexercise of the powers conferred on him unless such party is shown not to be subservient by a preponderance of the evidence. (d) Rule where power is subject to condition prece- dent A person shall be considered to have a power described in this subpart even though the exer- cise of the power is subject to a precedent giving of notice or takes effect only on the expi- ration of a certain period after the exercise of the power. (Aug. 16, 1954, ch. 736, 68A Stat. 226.) SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 678 of this title. § 673. Reversionary interests (a) General rule The grantor shall be treated as the owner of any portion of a trust in which he has a rever- sionary interest in either the corpus or the income therefrom if, as of the inception of that portion of the trust, the interest will or may reasonably be expected to take effect in posses- Page 473 §673