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than a grantor trust is also inconsistent with the manner in
which petitioner reported the items of income and deductions
attributable to the trust on her 1993 and 1994 Federal income tax
returns. Furthermore, the restrictions on the distribution of
trust corpus, do not, as petitioner suggests, remove the trust
from the provisions of section 671. See sec. 677. The trust is
a grantor trust, and the positions of the parties will be
considered accordingly.
Contrary to petitioner's argument, section 67(e) does not
and cannot apply to grantor trusts.1 Because the items of income
and deductions are passed through to the grantor, the adjusted
gross income of a grantor trust, in effect, is not a viable
notion either conceptually under the relevant statutory scheme,
or for reporting purposes. Pursuant to section 671, petitioner,
as a grantor of the trust, is required to include in the
computation of her taxable income, the items of income,
deductions and credits of the trust that are attributable to her
proportionate share of the trust. See sec. 1.671-4, Income Tax
Regs. This, in fact, is what she did on her 1993 and 1994
Federal income tax returns. These items are treated as though
received or paid by her, instead of by the trust. Sec. 1.671-
1Consequently, we need not address the controversy between
the parties regarding whether the type of expenses here in
question would not have been incurred but for the fact that the
property was held in trust. See O'Neill v. Commissioner, 994
F.2d 302 (6th Cir. 1993), revg. 98 T.C. 227 (1992).
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