court test definition
court test means that a trust governed by an agreement that attempts to give a foreign court exclusive jurisdiction over the trust will ordinarily not qualify as a U.S. trust, even if U.S. citizens control all the major decisions of the trust. Of course, if the normal jurisdictional tests were met (such as location of trust property in a United States jurisdiction, or presence of a trustee in the relevant jurisdiction), it is possible that a U.S. court would exercise jurisdiction notwithstanding a trust provision choosing a foreign forum, especially in the interests of justice. The final regulations issued in February 1999 implementing the new law provide that a trust will not meet the "court test" if the trust instrument contains a provision causing the trust to migrate from the United States if a U.S. court attempts to exercise jurisdiction over it.[5] Whether a U.S. court would honor such a provision when the regular jurisdictional predicates were otherwise satisfied is doubtful, but the inclusion of such a provision would ensure that the exercise of jurisdiction over the trust by a U.S. court, even if a majority of trustees were U.S. citizens or residents, would not change the foreign tax situs of the trust for U.S. tax purposes.