Section 671 Trust Income, Deductions, and Credits Attributable 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 whose items of income, deductions, and credits against tax of the trust which are attributable 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 individual. 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 taxable income and credits of the grantor or of any other person solely on the grounds of his dominion and control over the trust under section 61 (relating to definition of gross income) or any other provision of this title, except as specified in this subpart.
What the heck does *this* mean? It means if you created a trust, and put your assets in it, but still retain an interest in the property or the income from the property – it will be taxed to you, not to the trust. So why not just say so? Simple, declarative sentences. Sure, there are nuances: trust – or any part of trust — grantor – or an “other person” like a spouse. You can’t transfer your income *or* any tax item such as a deduction. Those nuances could *also* be more simply phrased.