§ 673 Reversionary interests

OLRC 119-134 · eCFR 2026-10-19 · 4 regs · 3 amending Acts · cited by 3 sections

Enacted 1954 · Act Aug. 16, 1954, ch. 736 Amended · 3 Acts

1954196919861988(a) General rule(b) Reversionary interest taking effect at death of minor lineal descendant beneficiary(c) Special rule for determining value of reversionary interest(d) Postponement of date specified for reacquisition
Connections Cited by 3 · Cites 0
§ 673 Reversionary interests
    Amended 1986
    • 1986 Pub. L. 99-514 Pub. L. 99–514 amended section generally, substituting “the value of such interest exceeds 5 percent of the value of such portion” for “the interest will or may reasonably be expected to take effect in possession or enjoyment within 10 years commencing with the date of the transfer of that portion of the trust” in subsec. (a), adding subsec. (b), striking out subsec. (c) which provided that the grantor not be treated under subsec. (a) as the owner of any portion of a trust where his reversionary interest in such portion was not to take effect in possession or enjoyment until the death of the persons to whom the income therefrom was payable, and subsec. (d) which provided that any postponement of the date specified for the reacquisition of possession or enjoyment of the reversionary interest be treated as a new transfer in trust commencing with the date on which the postponement was effected and terminating with the date prescribed by the postponement.

    Cases: Bibby v. Commissioner, 44 T.C. 638 (1965)

    (a) General rule The grantor shall be treated as the owner of any portion of a trust in which he has a reversionary interest in either the corpus or the income therefrom, if, as of the inception of that portion of the trust, the value of such interest exceeds 5 percent of the value of such portion.

    Textual readingALL OF= grantor treated as owner
    “he has a reversionary interest in either the corpus or the income therefrom”
    “as of the inception of that portion of the trust, the value of such interest exceeds 5 percent of the value of such portion”
    § 1.673(a)-1 Reversionary interests; income payable to beneficiaries other than certain charitable organizations; general rule.
    Cited by 4

      (b) Reversionary interest taking effect at death of minor lineal descendant beneficiary In the case of any beneficiary who—

      “solely by reason of a reversionary interest in such portion which takes effect upon the death of such beneficiary before such beneficiary attains age 21.” Closing words
      Textual readingALL OF= grantor not treated as owner solely by reason of reversionary interest

      (1) is a lineal descendant of the grantor, and

      (2) holds all of the present interests in any portion of a trust,

      the grantor shall not be treated under subsection (a) as the owner of such portion solely by reason of a reversionary interest in such portion which takes effect upon the death of such beneficiary before such beneficiary attains age 21.

      § 1.673(b)-1 Income payable to charitable beneficiaries before amendment by Tax Reform Act of 1969).
      Amended 1969
      • 1969 Pub. L. 91-172 Pub. L. 91–172 struck out provisions relating to trusts where the income was payable to a charitable beneficiary for at least a two-year period.
      Cited by 5

        (c) Special rule for determining value of reversionary interest For purposes of subsection (a), the value of the grantor’s reversionary interest shall be determined by assuming the maximum exercise of discretion in favor of the grantor.

        § 1.673(c)-1 Reversionary interest after income beneficiary's death.
        Amended 1988
        Cited by 1

          (d) Postponement of date specified for reacquisition Any postponement of the date specified for the reacquisition of possession or enjoyment of the reversionary interest shall be treated as a new transfer in trust commencing with the date on which the postponement is effective and terminating with the date prescribed by the postponement. However, income for any period shall not be included in the income of the grantor by reason of the preceding sentence if such income would not be so includible in the absence of such postponement.

          § 1.673(d)-1 Postponement of date specified for reacquisition.
          Amended 1988