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:

Power to distribute corpus to beneficiaries limited by an ascertainable standard.

Power to revoke the trust.

Power to allocate receipts between corpus and income.

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

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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