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escrow accounts, settlement funds, and similar funds generally
was incorporated in the Technical and Miscellaneous Revenue Act
of 1988 (TAMRA), Pub. L. 100-647, sec. 1018(f)(5)(A), 102 Stat.
3582, and was codified as section 468B(g). Section 468B(g)
provides:
SEC. 468B(g). Clarification of Taxation of
Certain Funds.--Nothing in any provision of law shall
be construed as providing that an escrow account,
settlement fund, or similar fund is not subject to
current income tax. The Secretary shall prescribe
regulations providing for the taxation of any such
account or fund whether as a grantor trust or
otherwise.
The section applies to escrow accounts, settlement funds, or
similar funds established after August 16, 1986. H. Rept. 100-
795, at 377 (1988); S. Rept. 100-445, at 398 (1988).
The committee reports contain the following guidance
concerning the regulations authorized by the statute:
It is anticipated that these regulations will
provide that if an amount is transferred to an account
or fund pursuant to an arrangement that constitutes a
trust, then the income earned by the amount transferred
will be currently taxed under Subchapter J of the Code.
Thus, for example, if the transferor retains a
reversionary interest in any portion of the trust that
exceeds 5 percent of the value of that portion, or the
income of the trust may be paid to the transferor, or
may be used to discharge a legal obligation of the
transferor, then the income is currently taxable to the
transferor under the grantor trust rules.
Id.
Final regulations under section 468B(g) were issued in
December 1992. Sec. 1.468B-1, Income Tax Regs. The scope of the
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