Grantor Trust Income and Deduction Flow-through

§ 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 those 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. (Aug. 16, 1954, ch. 736, 68A Stat. 226.) Statutory Notes and Related Subsidiaries Certain Entities Not Treated as CorporationsPub. L. 99–514, title VI, § 646, Oct. 22, 1986, 100 Stat. 2292, as amended by Pub. L. 100–647, title I, § 1006(k), Nov. 10, 1988, 102 Stat. 3411, provided that: “(a) General Rule.—For purposes of the Internal Revenue Code of 1986, if the entity described in subsection (b) makes an election under subsection (c), such entity shall be treated as a trust to which subpart E of part 1 of subchapter J of chapter 1 of such Code applies. “(b) Entity.—An entity is described in this subsection if—“(1) such entity was created in 1906 as a common law trust and is governed by the trust laws of the State of Minnesota, “(2) such entity is exclusively engaged in the leasing of mineral property and activities incidental thereto, and “(3) income interests in such entity are publicly traded as of October 22, 1986, on a national stock exchange. “(c) Election.—“(1) In general.—An election under this subsection to have the provisions of this section apply—“(A) shall be made by the board of trustees of the entity before January 1, 1991, and “(B) shall not be valid unless accompanied by an agreement described in paragraph (2). “(2) Agreement.—“(A) In general.—The agreement described in this paragraph is a written agreement signed by the board of trustees of the entity which provides that the entity will not acquire any additional property other than property described in subparagraph (B). “(B) Permissible acquisitions.—Property is described in this paragraph if it is—“(i) surface rights to property the acquisition of which—     “(I) is necessary to mine mineral rights held on October 22, 1986, and      “(II) is required by a written binding agreement between the entity and an unrelated person entered into on or before October 22, 1986,