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(1) Whether the taxpayer’s relationship as grantor to
the property differed materially before and after the
trust’s formation; (2) whether the trust had an
independent trustee; (3) whether an economic interest
passed to other beneficiaries of the trust; and (4)
whether the taxpayer felt bound by any restrictions
imposed by the trust itself or by the law of trusts.
* * * [Citations omitted.]
(2) Grantor Trust Provisions
Under specified circumstances, the statutory grantor trust
provisions, sections 671–679, treat the grantor of the trust and,
sometimes, a third party, as the substantial owner of all or part
of the trust. Trust income is taxed to the substantial owner
under the rules of section 671. Because the conditions imposed
by each of the grantor trust provisions are independent of those
imposed by the others, the grantor can avoid taxation only if
(1) he does not possess a disqualifying reversionary interest,
sec. 673; (2) the trust cannot be revoked by the grantor or a
nonadverse party, sec. 676; (3) trust income cannot be
distributed to the grantor or the grantor’s spouse or be used to
pay for insurance on their lives without the consent of an
adverse party, sec. 677; (4) specified powers to control
beneficial enjoyment of the corpus or income are not vested in
the grantor or certain other persons, sec. 674; and (5) certain
administrative powers are not exercisable by the grantor or a
nonadverse party, sec. 675.
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