Tax Code Section 671

Tax Code Section 671 deals with the taxation of trusts, specifically "grantor trusts." In simple terms, it states that if the person who creates a trust (the grantor) retains certain powers or interests, that person is still considered the owner of the trust’s assets for tax purposes. This means the income generated by the trust is reported on the grantor's personal tax return, rather than the trust paying taxes separately. The section ensures that the grantor is taxed on income while retaining control over the trust, preventing tax avoidance through trust arrangements.