Rev. Rul. 69-450

Subsequent to January 1, 1967, a citizen of the United States transferred appreciated stock of a corporation, in trust, to a bank incorporated and having its principal place of business in Bermuda. The trust is a foreign trust within the meaning of section 7701(a)(31) of the Internal Revenue Code of 1954. The United States citizen is treated as the owner of the entire trust (corpus as well as income) under the provisions of Subpart E, Part 1, Subchapter J, Chapter 1 of the Code. Therefore, he must take into account in computing his income tax liability all items of income, deduction and credit (including capital gains and losses) to which he would have been entitled had the trust not been in existence during the period he is treated as owner. Section 1.671-3(a)(1) of the Income Tax Regulations.

Held, the transfer of the appreciated stock is a transfer to a foreign trust and is subject to the provisions of section 1491 of the Code (unless section 1492 of the Code applies) even though the grantor is the owner of the entire trust the income of which must be taken into account by him.