Page:United States Statutes at Large Volume 110 Part 3.djvu/180

 110 STAT. 1910 PUBLIC LAW 104-188—AUG. 20, 1996 "(4) SPECIAL RULES APPLICABLE TO FOREIGN GRANTOR WHO LATER BECOMES A UNITED STATES PERSON.— " (A) IN GENERAL. —I f a nonresident alien individual has a residency starting date within 5 years after directly or indirectly transferring property to a foreign trust, this section and section 6048 shall be applied as if such individual transferred to such trust on the residency starting date an amount equal to the portion of such trust attributable to the property transferred by such individual to such trust in such transfer. "(B) TREATMENT OF UNDISTRIBUTED INCOME.—For purposes of this section, undistributed net income for periods before such individual's residency starting date shall be taken into account in determining the portion of the trust which is attributable to property transferred by such individual to such trust but shall not otherwise be taken into account. "(C) RESIDENCY STARTING DATE.— For purposes of this paragraph, an individual's residency starting date is the residency starting date determined under section 7701(b)(2)(A). "(5) OUTBOUND TRUST MIGRATIONS. — If— "(A) an individual who is a citizen or resident of the United States transferred property to a trust which was not a foreign trust, and "(B) such trust becomes a foreign trust while such individual is alive, then this section and section 6048 shall be applied as if such individual transferred to such trust on the date such trust becomes a foreign trust an amount equal to the portion of such trust attributable to the property previously transferred by such individual to such trust. A rule similar to the rule of paragraph (4)(B) shall apply for purposes of this paragraph.". (d) MODIFICATIONS RELATING TO WHETHER TRUST HAS UNITED STATES BENEFICIARIES. —Subsection (c) of section 679 is amended by adding at the end the following new paragraph: "(3) CERTAIN UNITED STATES BENEFICIARIES DISREGARDED. — A beneficiary shall not be treated as a United States person in applying this section with respect to any transfer of property to foreign trust if such beneficiary first became a United States person more than 5 years after the date of such transfer.". (e) TECHNICAL AMENDMENT. —Subparagraph (A) of section 679(c)(2) is amended to read as follows: "(A) in the case of a foreign corporation, such corporation is a controlled foreign corporation (as defined in section 957(a)),". (f) REGULATIONS.— Section 679 is amended by adding at the end the following new subsection: "(d) REGULATIONS.—The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section.". 26 USC 679 note. (g) EFFECTIVE DATE.— The amendments made by this section shall apply to transfers of property after February 6, 1995. SEC. 1904. FOREIGN PERSONS NOT TO BE TREATED AS OWNERS UNDER GRANTOR TRUST RULES. (a) GENERAL RULE. —

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