149 / When is life insurance trust income taxable to some person other than the trust, grantor, or income beneficiary?

A person who has exclusive power to vest the corpus (principal) or income of a trust in the grantor (even though the power cannot be exercised in the case of a minor because no guardian has been appointed), or who has released such a power but retained controls similar to those that would subject the grantor to tax, is taxed on the income of the trust ( Q 146).¹ If the grantor is taxable on the trust income, however, the other person will not be taxed under this rule, at least with respect to a power to vest income. When a grantor transfers a business interest to a trust, the trust, under certain circumstances, may be viewed by the IRS as a business organization itself.²