A trust in which the grantor retains such power over the trust or is given such power over a trust that all items of income and deduction are attributed to the person rather than the trust.

A trust in which the grantor retains such power over the trust or is given such power over a trust that all items of income and deduction are attributed to the person rather than the trust.

• A. Revocable
• B. Charitable
• C. Grantor
• D. Testamentary

Answer: (C)

The main idea here is grantor trust tax treatment. When the grantor retains certain powers over a trust (or is treated as the owner under the grantor trust rules), the trust is ignored for income tax purposes and all items of income and deductions are attributed to the grantor on the grantor’s personal tax return. That’s exactly what this description conveys, so the correct choice is the Grantor option. Think of it this way: if the grantor still controls or benefits from the trust in specific ways, the IRS treats the trust as if the grantor owns its income. The trust itself doesn’t pay tax on those items; the grantor does. That’s the hallmark of a grantor trust. A revocable trust often falls under grantor trust rules because control remains with the grantor, but the specific description focuses on the attribution of all income and deductions to the person, which points to grantor trust status rather than being something inherently charitable or testamentary in nature. Charitable trusts are usually separate tax entities with their own rules, and testamentary trusts are created upon death and don’t inherently involve the grantor being taxed on the trust’s items in the same way.

The main idea here is grantor trust tax treatment. When the grantor retains certain powers over a trust (or is treated as the owner under the grantor trust rules), the trust is ignored for income tax purposes and all items of income and deductions are attributed to the grantor on the grantor’s personal tax return. That’s exactly what this description conveys, so the correct choice is the Grantor option.

Think of it this way: if the grantor still controls or benefits from the trust in specific ways, the IRS treats the trust as if the grantor owns its income. The trust itself doesn’t pay tax on those items; the grantor does. That’s the hallmark of a grantor trust.

A revocable trust often falls under grantor trust rules because control remains with the grantor, but the specific description focuses on the attribution of all income and deductions to the person, which points to grantor trust status rather than being something inherently charitable or testamentary in nature. Charitable trusts are usually separate tax entities with their own rules, and testamentary trusts are created upon death and don’t inherently involve the grantor being taxed on the trust’s items in the same way.