ARTICLE 4

ALLOCATION OF RECEIPTS DURING ADMINISTRATION OF TRUST

 

PART I. RECEIPTS FROM ENTITIES

 

[557A-401] Character of receipts. (a) As used in this section, "entity" means a corporation, partnership, joint venture, limited liability company, regulated investment company, real estate investment trust, common trust fund, and any other organization in which a trustee has an interest other than a trust or estate to which section 557A-402 applies or a business or activity to which section 557A-403 applies, or an asset-backed security to which section 557A-415 applies.

(b) Except as otherwise provided in this section, money received by a trustee from an entity shall be allocated to income.

(c) Receipts from an entity that shall be allocated to principal include:

(1) Property other than money;

(2) Money received in one distribution or a series of related distributions in exchange for part or all of a trust's interest in the entity;

(3) Money received in total or partial liquidation of the entity; and

(4) Money received from an entity that is a regulated investment company or a real estate investment trust if the money distributed is a capital gain dividend for federal income tax purposes.

(d) Money is received in partial liquidation:

(1) To the extent that the entity, at or near the time of a distribution, indicates that it is a distribution in partial liquidation; or

(2) If the total amount of money or property received in a distribution or series of related distributions is greater than twenty per cent of the entity's gross assets, as shown by the entity's year-end financial statements immediately preceding the initial receipt.

(e) Money shall not be received in partial liquidation, nor shall it be taken into account under subsection (d)(2), to the extent that it does not exceed the amount of income tax that a trustee or beneficiary is required to pay on taxable income of the entity that distributes the money.

(f) A trustee may rely upon a statement made by an entity about the source or character of a distribution if the statement is made at or near the time of distribution by the entity's board of directors or other person or group of persons authorized to exercise powers to pay money or transfer property comparable to those of a corporation's board of directors. [L 2000, c 191, pt of 1]

 

 

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