Transfers to QTIP trust. On June 1, 1996, A transferred S corporation stock to a trust for the benefit of A’s spouse B, the terms of which satisfy the require- ments of section 2523(f)(2) as qualified ter- minable interest property. Under the terms of the trust, B is the sole income beneficiary for life. In addition, corpus may be distrib- uted to B, at the trustee’s discretion, during B’s lifetime. However, under section 677(a), A is treated as the owner of the trust. Accord- ingly, the trust is a permitted shareholder of the S corporation under section 1361(c)(2)(A)(i), and A is treated as the share- holder for purposes of sections 1361(b)(1), 1366, 1367, and 1368.
