Grantor’s retained power to reacquire and substitute assets results in a grantor trust
When a grantor retains the power to reacquire and substitute trust assets that is exercisable in a nonfiduciary capacity without the approval or consent of any person in a fiduciary capacity, the trust is taxed as a grantor trust for income tax purposes.￼ IRC 675(4)(c).
26 U.S. Code § 675. Administrative powers
The grantor shall be treated as the owner of any portion of a trust in respect of which –
. . .
(4) General powers of administration. A power of administration is exercisable in a nonfiduciary capacity by any person without the approval or consent of any person in a fiduciary capacity. For purposes of this paragraph, the term “power of administration” means any one or more of the following powers: . . . (C) a power to reacquire the trust corpus by substituting other property of an equivalent value.