2007 Oregon Code - Chapter 129 :: Chapter 129 - Uniform Principal and Income Act
Chapter 129 —
Uniform Principal and Income Act
2007 EDITION
UNIFORM PRINCIPAL AND INCOME ACT
PROTECTIVE PROCEEDINGS; POWERS OF ATTORNEY;
TRUSTS
DEFINITIONS AND FIDUCIARY DUTIES
129.200Â Â Â Â Short
title
129.205Â Â Â Â Definitions
129.210Â Â Â Â Fiduciary
duties; general principles
129.215Â Â Â Â TrusteeÂ’s
power to adjust
129.220Â Â Â Â Judicial
control of discretionary power
129.225Â Â Â Â Conversion
to unitrust
DECEDENTÂ’S ESTATE OR TERMINATING INCOME
INTEREST
129.250Â Â Â Â Determination
and distribution of net income
129.255Â Â Â Â Distribution
to residuary and remainder beneficiaries
APPORTIONMENT AT BEGINNING AND END OF INCOME
INTEREST
129.270Â Â Â Â When
right to income begins and ends
129.275Â Â Â Â Apportionment
of receipts and disbursements when decedent dies or income interest begins
129.280Â Â Â Â Apportionment
when income interest ends
ALLOCATION OF RECEIPTS DURING ADMINISTRATION
OF TRUST
(Receipts From Entities)
129.300Â Â Â Â Character
of receipts
129.305Â Â Â Â Distribution
from trust or estate
129.308Â Â Â Â Business
and other activities conducted by trustee
(Receipts Not Normally Apportioned)
129.310Â Â Â Â Principal
receipts
129.315Â Â Â Â Rental
property
129.320Â Â Â Â Obligation
to pay money
129.325Â Â Â Â Insurance
policies and similar contracts
(Receipts Normally Apportioned)
129.350Â Â Â Â Insubstantial
allocations not required
129.355Â Â Â Â Deferred
compensation, annuities and similar payments
129.360Â Â Â Â Liquidating
asset
129.365Â Â Â Â Minerals,
water and other natural resources
129.370Â Â Â Â Timber
129.375Â Â Â Â Property
not productive of income
129.380Â Â Â Â Derivatives
and options
129.385Â Â Â Â Asset-backed
securities
ALLOCATION OF DISBURSEMENTS DURING
ADMINISTRATION OF TRUST
129.400Â Â Â Â Disbursements
from income
129.405Â Â Â Â Disbursements
from principal
129.410Â Â Â Â Transfers
from income to principal for depreciation
129.415Â Â Â Â Transfers
from income to reimburse principal
129.420Â Â Â Â Income
taxes
129.425Â Â Â Â Adjustments
between principal and income because of taxes
UNIFORMITY OF APPLICATION
129.450Â Â Â Â Uniformity
of application and construction
     129.005 [1975 c.717 §12 (enacted in lieu of 129.010 to 129.080 and 129.110 to
129.140); repealed by 2003 c.279 §36]
     129.010 [Repealed by 1975 c.717 §1]
     129.015 [1975 c.717 §11 (enacted in lieu of 129.010
to 129.080 and 129.110 to 129.140); repealed by 2003 c.279 §36]
     129.020 [Repealed by 1975 c.717 §1]
     129.025 [1975 c.717 §2 (enacted in lieu of 129.010
to 129.080 and 129.110 to 129.140); 2003 c.14 §47; repealed by 2003 c.279 §36]
     129.030 [Repealed by 1975 c.717 §1]
     129.035 [1975 c.717 §4 (enacted in lieu of 129.010
to 129.080 and 129.110 to 129.140); 2003 c.14 §48; repealed by 2003 c.279 §36]
     129.040 [Repealed by 1975 c.717 §1]
     129.045 [1975 c.717 §3 (enacted in lieu of 129.010
to 129.080 and 129.110 to 129.140); 2001 c.104 §41; 2003 c.14 §49; repealed by
2003 c.279 §36]
     129.050 [Amended by 1963 c.437 §1; 1973 c.272 §1;
repealed by 1975 c.717 §1]
     129.055 [1975 c.717 §5 (enacted in lieu of 129.010
to 129.080 and 129.110 to 129.140); repealed by 2003 c.279 §36]
     129.060 [Repealed by 1975 c.717 §1]
     129.065 [1975 c.717 §6 (enacted in lieu of 129.010
to 129.080 and 129.110 to 129.140); repealed by 2003 c.279 §36]
     129.070 [Repealed by 1975 c.717 §1]
     129.075 [1975 c.717 §7 (enacted in lieu of 129.010
to 129.080 and 129.110 to 129.140); 1991 c.620 §1; repealed by 2003 c.279 §36]
     129.080 [Repealed by 1975 c.717 §1]
     129.085 [1975 c.717 §8 (enacted in lieu of 129.010
to 129.080 and 129.110 to 129.140); repealed by 2003 c.279 §36]
     129.090 [Amended by 1975 c.717 §16; repealed by 2003
c.279 §36]
     129.100 [Amended by 1975 c.717 §17; repealed by 2003
c.279 §36]
     129.105 [1975 c.717 §9 (enacted in lieu of 129.010
to 129.080 and 129.110 to 129.140); repealed by 2003 c.279 §36]
     129.110 [Repealed by 1975 c.717 §1]
     129.115 [1975 c.717 §10 (enacted in lieu of 129.010
to 129.080 and 129.110 to 129.140); 2003 c.14 §50; repealed by 2003 c.279 §36]
     129.120 [Repealed by 1975 c.717 §1]
     129.125 [1975 c.717 §13 (enacted in lieu of 129.010
to 129.080 and 129.110 to 129.140); repealed by 2003 c.279 §36]
     129.130 [Repealed by 1975 c.717 §1]
     129.140 [Repealed by 1975 c.717 §1]
DEFINITIONS
AND FIDUCIARY DUTIES
     129.200
Short title. This chapter
may be cited as the Uniform Principal and Income Act. [2003 c.279 §1]
     Note: Section 34, chapter 279, Oregon Laws 2003,
provides:
     Sec.
34. Except as may be
expressly provided in a will or in the terms of a trust or in sections 1 to 31
of this 2003 Act [ORS chapter 129], sections 1 to 31 of this 2003 Act apply to
the administration of all trusts and estates, whether coming into existence
before, on or after the effective date of this 2003 Act [January 1, 2004].
[2003 c.279 §34]
     129.205
Definitions. In this
chapter:
     (1) “Accounting period” means a calendar
year unless another 12-month period is selected by a fiduciary. The term
includes a portion of a calendar year or other 12-month period that begins when
an income interest begins or ends when an income interest ends.
     (2) “Beneficiary” includes, in the case of
a decedentÂ’s estate, an heir and devisee and, in the case of a trust, an income
beneficiary and a remainder beneficiary.
     (3) “Fiduciary” means a personal
representative or a trustee. The term includes an executor, administrator,
successor personal representative, special administrator and a person
performing substantially the same function.
     (4) “Income” means money or property that
a fiduciary receives as current return from a principal asset. The term
includes a portion of receipts from a sale, exchange or liquidation of a
principal asset, to the extent provided in ORS 129.300 to 129.385.
     (5) “Income beneficiary” means a person to
whom net income of a trust is or may be payable.
     (6) “Income interest” means the right of
an income beneficiary to receive all or part of net income, whether the terms
of the trust require it to be distributed or authorize it to be distributed in
the trusteeÂ’s discretion.
     (7) “Mandatory income interest” means the
right of an income beneficiary to receive net income that the terms of the
trust require the fiduciary to distribute.
     (8) “Net income” means the total receipts
allocated to income during an accounting period minus the disbursements made
from income during the period, plus or minus transfers under this chapter to or
from income during the period.
     (9) “Person” means an individual,
corporation, business trust, estate, trust, partnership, limited liability company,
association, joint venture, government, governmental subdivision, agency or
instrumentality, public corporation or any other legal or commercial entity.
     (10) “Principal” means property held in
trust for distribution to a remainder beneficiary when the trust terminates.
     (11) “Remainder beneficiary” means a
person entitled to receive principal when an income interest ends.
     (12) “Terms of a trust” means the
manifestation of the intent of a settlor or decedent with respect to the trust,
expressed in a manner that admits of its proof in a judicial proceeding,
whether by written or spoken words or by conduct.
     (13) “Trustee” includes an original,
additional or successor trustee, whether or not appointed or confirmed by a
court. [2003 c.279 §2]
     129.210
Fiduciary duties; general principles. (1) In allocating receipts and disbursements to or between principal
and income, and with respect to any matter within the scope of ORS 129.250 to
129.280, a fiduciary:
     (a) Shall administer a trust or estate in
accordance with the terms of the trust or the will, even if there is a
different provision in this chapter;
     (b) May administer a trust or estate by
the exercise of a discretionary power of administration given to the fiduciary
by the terms of the trust or the will, even if the exercise of the power
produces a result different from a result required or permitted by this
chapter;
     (c) Shall administer a trust or estate in
accordance with this chapter if the terms of the trust or the will do not
contain a different provision or do not give the fiduciary a discretionary
power of administration; and
     (d) Shall add a receipt or charge a
disbursement to principal to the extent that the terms of the trust and this
chapter do not provide a rule for allocating the receipt or disbursement to or
between principal and income.
     (2) In exercising the power to adjust
under ORS 129.215 (1), or a discretionary power of administration regarding a
matter within the scope of this chapter, whether granted by the terms of a
trust, a will or by this chapter, a fiduciary shall administer a trust or
estate impartially, based on what is fair and reasonable to all of the
beneficiaries, except to the extent that the terms of the trust or the will
clearly manifest an intention that the fiduciary shall or may favor one or more
of the beneficiaries. A determination in accordance with this chapter is
presumed to be fair and reasonable to all of the beneficiaries. [2003 c.279 §3]
     129.215
TrusteeÂ’s power to adjust.
(1) A trustee may adjust between principal and income to the extent the trustee
considers necessary if the trustee invests and manages trust assets as a
prudent investor, the terms of the trust describe the amount that may or must
be distributed to a beneficiary by referring to the trustÂ’s income and the
trustee determines, after applying the rules in ORS 129.210 (1), that the
trustee is unable to comply with ORS 129.210 (2).
     (2) In deciding whether and to what extent
to exercise the power conferred by subsection (1) of this section, a trustee
shall consider all factors relevant to the trust and its beneficiaries,
including the following factors to the extent they are relevant:
     (a) The nature, purpose and expected
duration of the trust;
     (b) The intent of the settlor;
     (c) The identity and circumstances of the
beneficiaries;
     (d) The needs for liquidity, regularity of
income and preservation and appreciation of capital;
     (e) The assets held in the trust, the
extent to which they consist of financial assets, interests in closely held
enterprises, tangible and intangible personal property or real property, the
extent to which an asset is used by a beneficiary and whether an asset was
purchased by the trustee or received from the settlor;
     (f) The net amount allocated to income
under the other sections of this chapter and the increase or decrease in the
value of the principal assets, which the trustee may estimate as to assets for
which market values are not readily available;
     (g) Whether and to what extent the terms
of the trust give the trustee the power to invade principal or accumulate
income or prohibit the trustee from invading principal or accumulating income,
and the extent to which the trustee has exercised a power from time to time to
invade principal or accumulate income;
     (h) The actual and anticipated effect of
economic conditions on principal and income and effects of inflation and
deflation; and
     (i) The anticipated tax consequences of an
adjustment.
     (3) A trustee may not make an adjustment:
     (a) That diminishes the income interest in
a trust that requires all of the income to be paid at least annually to a
spouse and for which an estate tax or gift tax marital deduction would be
allowed, in whole or in part, if the trustee did not have the power to make the
adjustment;
     (b) That reduces the actuarial value of
the income interest in a trust to which a person transfers property with the
intent to qualify for a gift tax exclusion;
     (c) That changes the amount payable to a
beneficiary as a fixed annuity or a fixed fraction of the value of the trust
assets;
     (d) From any amount that is permanently
set aside for charitable purposes under a will or the terms of a trust unless
both income and principal are so set aside;
     (e) If possessing or exercising the power
to make an adjustment causes an individual to be treated as the owner of all or
part of the trust for income tax purposes and the individual would not be
treated as the owner if the trustee did not possess the power to make an
adjustment;
     (f) If possessing or exercising the power
to make an adjustment causes all or part of the trust assets to be included for
estate tax purposes in the estate of an individual who has the power to remove
a trustee or appoint a trustee, or both, and the assets would not be included
in the estate of the individual if the trustee did not possess the power to
make an adjustment;
     (g) If the trustee is a beneficiary of the
trust; or
     (h) If the power to make adjustments has
been released upon conversion of the trust to a unitrust under ORS 129.225.
     (4) If subsection (3)(e), (f), (g) or (h)
of this section applies to a trustee and there is more than one trustee, a
cotrustee to whom the provision does not apply may make the adjustment unless
the exercise of the power by the remaining trustee or trustees is not permitted
by the terms of the trust.
     (5) A trustee may release the entire power
conferred by subsection (1) of this section or may release only the power to
adjust from income to principal or the power to adjust from principal to income
if the trustee is uncertain about whether possessing or exercising the power
will cause a result described in subsection (3)(a) to (f) of this section or
subsection (3)(h) of this section, or if the trustee determines that possessing
or exercising the power will or may deprive the trust of a tax benefit or
impose a tax burden not described in subsection (3) of this section. The
release may be permanent or for a specified period, including a period measured
by the life of an individual.
     (6) Terms of a trust that limit the power
of a trustee to make an adjustment between principal and income do not affect
the application of this section unless it is clear from the terms of the trust
that the terms are intended to deny the trustee the power of adjustment
conferred by subsection (1) of this section. [2003 c.279 §4]
     129.220
Judicial control of discretionary power. (1) The court may not order a fiduciary to change a decision to
exercise or not to exercise a discretionary power conferred by this chapter
unless it determines that the decision was an abuse of the fiduciaryÂ’s
discretion. A fiduciaryÂ’s decision is not an abuse of discretion merely because
the court would have exercised the power in a different manner or would not
have exercised the power.
     (2) The decisions to which subsection (1)
of this section applies include:
     (a) A decision under ORS 129.215 (1) as to
whether and to what extent an amount should be transferred from principal to
income or from income to principal.
     (b) A decision regarding the factors that
are relevant to the trust and its beneficiaries, the extent to which the
factors are relevant and the weight, if any, to be given to those factors in
deciding whether and to what extent to exercise the discretionary power
conferred by ORS 129.215 (1).
     (3) If the court determines that a
fiduciary has abused the fiduciaryÂ’s discretion, the court may place the income
and remainder beneficiaries in the positions they would have occupied if the
discretion had not been abused, according to the following rules:
     (a) To the extent that the abuse of
discretion has resulted in no distribution to a beneficiary or in a
distribution that is too small, the court shall order the fiduciary to
distribute from the trust to the beneficiary an amount that the court
determines will restore the beneficiary, in whole or in part, to the
beneficiaryÂ’s appropriate position.
     (b) To the extent that the abuse of
discretion has resulted in a distribution to a beneficiary that is too large,
the court shall place the beneficiaries, the trust, or both, in whole or in
part, in their appropriate positions by ordering the fiduciary to withhold an
amount from one or more future distributions to the beneficiary who received
the distribution that was too large or ordering that beneficiary to return some
or all of the distribution to the trust.
     (c) To the extent that the court is
unable, after applying paragraphs (a) and (b) of this subsection, to place the
beneficiaries, the trust, or both, in the positions they would have occupied if
the discretion had not been abused, the court may order the fiduciary to pay an
appropriate amount from its own funds to one or more of the beneficiaries or
the trust or both.
     (4) Upon petition by the fiduciary for
instructions, the court having jurisdiction over a trust or estate may instruct
the fiduciary on whether a proposed exercise or nonexercise by the fiduciary of
a discretionary power conferred by this chapter will result in an abuse of the
fiduciaryÂ’s discretion. If the petition describes the proposed exercise or nonexercise
of the power and contains sufficient information to inform the beneficiaries of
the reasons for the proposal, the facts upon which the fiduciary relies and an
explanation of how the income and remainder beneficiaries will be affected by
the proposed exercise or nonexercise of the power, a beneficiary who challenges
the proposed exercise or nonexercise has the burden of establishing that it
will result in an abuse of discretion. [2003 c.279 §4a; 2005 c.348 §119]
     129.225
Conversion to unitrust. (1)
As used in this section, “beneficiary” means a person who has an interest in
the trust to be converted and who has the legal capacity to take all actions
authorized under this section.
     (2)(a) Unless expressly prohibited by the
terms of the trust, a trustee may release the power to make adjustments under
ORS 129.215 (1) and convert a trust into a unitrust if the trustee determines
that the conversion will enable the trustee to carry out more accurately the
intent of the settlor and the purposes of the trust and that operation of the
trust as a unitrust is consistent with the duties of the trustee under ORS
129.210 (2).
     (b) Not less than 60 days before making a
conversion under this section, a trustee must give written notice to all
beneficiaries who either are eligible to receive income from the trust at the
time the notice is given, or who would receive a distribution of principal if
the trust were to terminate immediately before the notice is given and no power
of appointment was exercised. The notice must indicate that the trustee intends
to release the power to adjust and to convert the trust into a unitrust, must
describe how the unitrust will operate and must include a description of the
initial decisions the trustee will make under this section.
     (c) A trustee may not convert a trust to a
unitrust under this section if any beneficiary objects to the conversion to a
unitrust in a writing delivered to the trustee within 60 days after notice is
given under this subsection.
     (3) The trustee or any beneficiary may
file a petition to seek issuance of a court order directing conversion of a
trust to a unitrust. The court shall order the requested conversion if the
court concludes that the conversion will enable the trustee to carry out more
accurately the intent of the settlor and the purposes of the trust, and that
operation of the trust as a unitrust is consistent with the duties of the
trustee under ORS 129.210 (2).
     (4) After a trust is converted to a
unitrust under this section, all of the following apply:
     (a) The trustee must invest and manage
trust assets as a prudent investor, and must follow an investment policy
seeking a total return for trust investments, whether that return is derived
from appreciation of principal or from earnings and distributions from
principal.
     (b) The trustee must make regular
distributions in accordance with the terms of the trust. All provisions of the
trust relating to distribution of income shall be construed to refer to an
annual unitrust distribution equal to four percent of the fair market value of
trust assets, averaged over the lesser of the three preceding calendar years or
the period during which the trust has been in existence.
     (c) In calculating the unitrust
distribution, the trustee shall use the value of trust assets on the first
business day of each calendar year for purposes of determining average value.
The trustee may, in the trusteeÂ’s discretion, determine the manner in which the
unitrust distribution will be prorated for a year in which a beneficiaryÂ’s right
to payments begins or ends, the effect on trust asset valuation of other
payments from or contributions to the trust, whether to estimate the value of
nonliquid assets, whether to omit from the calculations trust property occupied
or possessed by a beneficiary and any other matters necessary for the proper
administration of the unitrust.
     (d) Expenses that would be deducted from
income under this chapter if the trust was not a unitrust shall not be deducted
from the unitrust distribution.
     (e) Unless otherwise provided by the terms
of the trust, the unitrust distribution must be paid first from net income, as
that amount would be determined if the trust were not a unitrust. To the extent
that net income is insufficient, the unitrust distribution shall be paid first
from net realized short-term capital gains, then from net realized long-term
capital gains and finally from trust principal.
     (f) Conversion to a unitrust does not
affect any provision in the terms of the trust directing or authorizing a
trustee to distribute trust principal or authorizing a beneficiary to withdraw
a portion or all of the principal.
     (5) The trustee or any beneficiary may
file a petition to seek issuance of a court order directing any of the
following:
     (a) The distribution of net income, as
that amount would be determined if the trust were not a unitrust, in excess of
the unitrust distribution, if the excess distribution is necessary to preserve
a tax benefit.
     (b) The selection of a period other than
three years for purposes of calculating average trust asset values.
     (c) Reconversion from a unitrust. If a
reconversion is ordered, the power to make adjustments under ORS 129.215 (1) is
revived.
     (6) A trustee does not have and may not
exercise any power under this section in any of the following circumstances:
     (a) The unitrust distribution would be
made from any amount that is permanently set aside for charitable purposes
under the terms of the trust and for which a charitable deduction from federal
gift, estate or income taxes has been taken.
     (b) The possession or exercise of the
power would cause an individual to be treated as the owner of all or part of
the trust for federal income tax purposes and the individual would not be
treated as an owner if the trustee did not possess or exercise the power.
     (c) The possession or exercise of the
power would cause all or any part of the trust assets to be subject to any
federal gift or estate tax with respect to an individual and the trust assets
would not be subject to that taxation if the trustee did not possess or
exercise the power.
     (d) The possession or exercise of the
power would result in the disallowance of a marital deduction from federal
estate or gift tax that would be allowed if the trustee did not possess or
exercise the power.
     (e) The trustee is a beneficiary of the
trust.
     (7) If subsection (6) of this section
applies to a trustee and there is more than one trustee, a cotrustee to whom
subsection (6) of this section does not apply may possess and exercise the
powers under this section unless the possession or exercise of those powers is
not permitted by the terms of the trust. If subsection (6) of this section
restricts all trustees from possessing or exercising a power under this
section, a trustee may file a petition requesting that the court order the
requested action. [2003 c.279 §4b; 2005 c.348 §120]
DECEDENTÂ’S
ESTATE OR TERMINATING INCOME INTEREST
     129.250
Determination and distribution of net income. After a decedent dies, in the case of an estate, or after an income interest
in a trust ends, the following rules apply:
     (1) A fiduciary of an estate or of a
terminating income interest shall determine the amount of net income and net
principal receipts received from property specifically given to a beneficiary
under the rules in ORS 129.270 to 129.425 that apply to trustees and the rules
in subsection (5) of this section. The fiduciary shall distribute the net
income and net principal receipts to the beneficiary who is to receive the
specific property.
     (2) A fiduciary shall determine the
remaining net income of a decedentÂ’s estate or a terminating income interest
under the rules in ORS 129.270 to 129.425 that apply to trustees and by:
     (a) Including in net income all income
from property used to discharge liabilities;
     (b) Paying from income or principal, in
the fiduciaryÂ’s discretion, fees of attorneys, accountants and fiduciaries,
court costs and other expenses of administration and interest on death taxes,
but the fiduciary may pay those expenses from income of property passing to a
trust for which the fiduciary claims an estate tax marital or charitable
deduction only to the extent that the payment of those expenses from income
will not cause the reduction or loss of the deduction; and
     (c) Paying from principal all other
disbursements made or incurred in connection with the settlement of a decedentÂ’s
estate or the winding up of a terminating income interest, including debts,
funeral expenses, disposition of remains, family allowances, and death taxes
and related penalties that are apportioned to the estate or terminating income
interest by the will, the terms of the trust or applicable law.
     (3) A fiduciary shall distribute to a
beneficiary who receives a pecuniary amount outright the interest or any other
amount provided by the will, the terms of the trust or applicable law from net
income determined under subsection (2) of this section or from principal to the
extent that net income is insufficient. If a beneficiary is to receive a
pecuniary amount outright from a trust after an income interest ends and no
interest or other amount is provided for by the terms of the trust or
applicable law, the fiduciary shall distribute the interest or other amount to
which the beneficiary would be entitled under applicable law if the pecuniary
amount were required to be paid under a will.
     (4) A fiduciary shall distribute the net
income remaining after distributions required by subsection (3) of this section
in the manner described in ORS 129.255 to all other beneficiaries, including a beneficiary
who receives a pecuniary amount in trust, even if the beneficiary holds an
unqualified power to withdraw assets from the trust or other presently
exercisable general power of appointment over the trust.
     (5) A fiduciary may not reduce principal
or income receipts from property described in subsection (1) of this section
because of a payment described in ORS 129.400 or 129.405 to the extent that the
will, the terms of the trust or applicable law requires the fiduciary to make
the payment from assets other than the property or to the extent that the
fiduciary recovers or expects to recover the payment from a third party. The
net income and principal receipts from the property are determined by including
all of the amounts the fiduciary receives or pays with respect to the property,
whether those amounts accrued or became due before, on or after the date of a
decedentÂ’s death or an income interestÂ’s terminating event, and by making a
reasonable provision for amounts that the fiduciary believes the estate or
terminating income interest may become obligated to pay after the property is
distributed. [2003 c.279 §5]
     129.255
Distribution to residuary and remainder beneficiaries. (1) Each beneficiary described in ORS
129.250 (4) is entitled to receive a portion of the net income equal to the
beneficiaryÂ’s fractional interest in undistributed principal assets, using
values as of the distribution date. If a fiduciary makes more than one
distribution of assets to beneficiaries to whom this section applies, each
beneficiary, including one who does not receive part of the distribution, is
entitled, as of each distribution date, to the net income the fiduciary has
received after the date of death or terminating event or earlier distribution
date but has not distributed as of the current distribution date.
     (2) In determining a beneficiary’s share
of net income, the following rules apply:
     (a) The beneficiary is entitled to receive
a portion of the net income equal to the beneficiaryÂ’s fractional interest in
the undistributed principal assets immediately before the distribution date,
including assets that later may be sold to meet principal obligations.
     (b) The beneficiary’s fractional interest
in the undistributed principal assets must be calculated without regard to
property specifically given to a beneficiary and property required to pay
pecuniary amounts not in trust.
     (c) The beneficiary’s fractional interest
in the undistributed principal assets must be calculated on the basis of the
aggregate value of those assets as of the distribution date without reducing
the value by any unpaid principal obligation.
     (d) The distribution date for purposes of
this section may be the date as of which the fiduciary calculates the value of
the assets if that date is reasonably near the date on which assets are
actually distributed.
     (3) If a fiduciary does not distribute all
of the collected but undistributed net income to each person as of a
distribution date, the fiduciary shall maintain appropriate records showing the
interest of each beneficiary in that net income.
     (4) A fiduciary may apply the rules in
this section, to the extent that the fiduciary considers it appropriate, to net
gain or loss realized after the date of death or terminating event or earlier
distribution date from the disposition of a principal asset if this section
applies to the income from the asset. [2003 c.279 §6]
APPORTIONMENT
AT BEGINNING AND END OF INCOME INTEREST
     129.270
When right to income begins and ends. (1) An income beneficiary is entitled to net income from the date on
which the income interest begins. An income interest begins on the date
specified in the terms of the trust or, if no date is specified, on the date an
asset becomes subject to a trust or successive income interest.
     (2) An asset becomes subject to a trust:
     (a) On the date it is transferred to the
trust in the case of an asset that is transferred to a trust during the
transferorÂ’s life;
     (b) On the date of a testator’s death in
the case of an asset that becomes subject to a trust by reason of a will, even
if there is an intervening period of administration of the testatorÂ’s estate;
or
     (c) On the date of an individual’s death
in the case of an asset that is transferred to a fiduciary by a third party
because of the individualÂ’s death.
     (3) An asset becomes subject to a
successive income interest on the day after the preceding income interest ends,
as determined under subsection (4) of this section, even if there is an
intervening period of administration to wind up the preceding income interest.
     (4) An income interest ends on the day
before an income beneficiary dies or another terminating event occurs or on the
last day of a period during which there is no beneficiary to whom a trustee may
distribute income. [2003 c.279 §7]
     129.275
Apportionment of receipts and disbursements when decedent dies or income
interest begins. (1) A
trustee shall allocate an income receipt or disbursement other than one to
which ORS 129.250 (1) applies to principal if its due date occurs before a decedent
dies in the case of an estate or before an income interest begins in the case
of a trust or successive income interest.
     (2) A trustee shall allocate an income
receipt or disbursement to income if its due date occurs on or after the date
on which a decedent dies or an income interest begins and it is a periodic due
date. An income receipt or disbursement must be treated as accruing from day to
day if its due date is not periodic or it has no due date. The portion of the
receipt or disbursement accruing before the date on which a decedent dies or an
income interest begins must be allocated to principal and the balance must be
allocated to income.
     (3) An item of income or an obligation is
due on the date the payer is required to make a payment. If a payment date is
not stated, there is no due date for the purposes of this chapter.
Distributions to shareholders or other owners from an entity to which ORS
129.300 applies are deemed to be due on the date fixed by the entity for
determining who is entitled to receive the distribution or, if no date is
fixed, on the declaration date for the distribution. A due date is periodic for
receipts or disbursements that must be paid at regular intervals under a lease
or an obligation to pay interest or if an entity customarily makes
distributions at regular intervals. [2003 c.279 §8]
     129.280
Apportionment when income interest ends. (1) In this section, “undistributed income” means net income received
before the date on which an income interest ends. The term does not include an
item of income or expense that is due or accrued or net income that has been
added or is required to be added to principal under the terms of the trust.
     (2) When a mandatory income interest ends,
the trustee shall pay to a mandatory income beneficiary who survives that date,
or the estate of a deceased mandatory income beneficiary whose death causes the
interest to end, the beneficiaryÂ’s share of the undistributed income that is
not disposed of under the terms of the trust unless the beneficiary has an
unqualified power to revoke more than five percent of the trust immediately
before the income interest ends. In the latter case, the undistributed income
from the portion of the trust that may be revoked must be added to principal.
     (3) When a trustee’s obligation to pay a
fixed annuity or a fixed fraction of the value of the trustÂ’s assets ends, the
trustee shall prorate the final payment if and to the extent required by
applicable law to accomplish a purpose of the trust or its settlor relating to
income, gift, estate or other tax requirements. [2003 c.279 §9]
ALLOCATION OF
RECEIPTS DURING ADMINISTRATION OF TRUST
(Receipts
From Entities)
     129.300
Character of receipts. (1)
In this section, “entity” means a corporation, partnership, limited liability
company, regulated investment company, real estate investment trust, common
trust fund or any other organization in which a trustee has an interest other
than a trust or estate to which ORS 129.305 applies, a business or activity to
which ORS 129.308 applies or an asset-backed security to which ORS 129.385
applies.
     (2) Except as otherwise provided in this
section, a trustee shall allocate to income money received from an entity.
     (3) A trustee shall allocate the following
receipts from an entity to principal:
     (a) Property other than money;
     (b) Money received in one distribution or
a series of related distributions in exchange for part or all of a trustÂ’s
interest in the entity;
     (c) Money received in total or partial
liquidation of the entity; and
     (d) 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.
     (4) Money is received in partial
liquidation:
     (a) To the extent that the entity, at or
near the time of a distribution, indicates that it is a distribution in partial
liquidation; or
     (b) If the total amount of money and
property distributed by an entity in a distribution or series of related
distributions is greater than 20 percent of the entityÂ’s gross assets, as shown
by the entityÂ’s year-end financial statements immediately preceding the initial
distribution.
     (5) Money is not received in partial
liquidation, nor may it be taken into account under subsection (4)(b) of this
section, to the extent that it does not exceed the amount of income tax that a
trustee or beneficiary must pay on taxable income of the entity that
distributes the money.
     (6) 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 entityÂ’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 corporationÂ’s board of
directors. [2003 c.279 §10; 2007 c.130 §1]
     129.305
Distribution from trust or estate. A trustee shall allocate to income an amount received as a
distribution of income from a trust or an estate in which the trust has an
interest other than a purchased interest, and shall allocate to principal an
amount received as a distribution of principal from such a trust or estate. If
a trustee purchases an interest in a trust that is an investment entity, or a
decedent or donor transfers an interest in such a trust to a trustee, ORS
129.300 or 129.385 applies to a receipt from the trust. [2003 c.279 §11]
     129.308
Business and other activities conducted by trustee. (1) If a trustee who conducts a business or
other activity determines that it is in the best interest of all the
beneficiaries to account separately for the business or activity instead of
accounting for it as part of the trustÂ’s general accounting records, the
trustee may maintain separate accounting records for its transactions, whether
or not its assets are segregated from other trust assets.
     (2) A trustee who accounts separately for
a business or other activity may determine the extent to which its net cash
receipts must be retained for working capital, the acquisition or replacement
of fixed assets, and other reasonably foreseeable needs of the business or
activity, and the extent to which the remaining net cash receipts are accounted
for as principal or income in the trustÂ’s general accounting records. If a
trustee sells assets of the business or other activity, other than in the
ordinary course of the business or activity, the trustee shall account for the
net amount received as principal in the trustÂ’s general accounting records to
the extent the trustee determines that the amount received is no longer
required in the conduct of the business.
     (3) Activities for which a trustee may
maintain separate accounting records include:
     (a) Retail, manufacturing, service and
other traditional business activities;
     (b) Farming;
     (c) Raising and selling livestock and
other animals;
     (d) Management of rental properties;
     (e) Extraction of minerals and other
natural resources;
     (f) Timber operations; and
     (g) Activities to which ORS 129.380
applies. [2003 c.279 §12]
(Receipts Not
Normally Apportioned)
     129.310
Principal receipts. A
trustee shall allocate to principal:
     (1) To the extent not allocated to income
under this chapter, assets received from a transferor during the transferorÂ’s
lifetime, a decedentÂ’s estate, a trust with a terminating income interest or a
payer under a contract naming the trust or its trustee as beneficiary;
     (2) Money or other property received from
the sale, exchange, liquidation or change in form of a principal asset,
including realized profit, subject to ORS 129.300 to 129.385;
     (3) Amounts recovered from third parties
to reimburse the trust because of disbursements described in ORS 129.405 (1)(g)
or for other reasons to the extent not based on the loss of income;
     (4) Proceeds of property taken by eminent
domain, but a separate award made for the loss of income with respect to an
accounting period during which a current income beneficiary had a mandatory
income interest is income;
     (5) Net income received in an accounting
period during which there is no beneficiary to whom a trustee may or must
distribute income; and
     (6) Other receipts as provided in ORS
129.350 to 129.385. [2003 c.279 §13]
     129.315
Rental property. To the
extent that a trustee accounts for receipts from rental property pursuant to
this section, the trustee shall allocate to income an amount received as rent
of real or personal property, including an amount received for cancellation or
renewal of a lease. An amount received as a refundable deposit, including a
security deposit or a deposit that is to be applied as rent for future periods,
must be added to principal and held subject to the terms of the lease and is
not available for distribution to a beneficiary until the trusteeÂ’s contractual
obligations have been satisfied with respect to that amount. [2003 c.279 §14]
     129.320
Obligation to pay money. (1)
An amount received as interest, whether determined at a fixed, variable or
floating rate, on an obligation to pay money to the trustee, including an
amount received as consideration for prepaying principal, must be allocated to
income without any provision for amortization of premium.
     (2) A trustee shall allocate to principal
an amount received from the sale, redemption or other disposition of an
obligation to pay money to the trustee more than one year after it is purchased
or acquired by the trustee, including an obligation whose purchase price or
value when it is acquired is less than its value at maturity. If the obligation
matures within one year after it is purchased or acquired by the trustee, an
amount received in excess of its purchase price or its value when acquired by
the trust must be allocated to income.
     (3) This section does not apply to an
obligation to which ORS 129.355, 129.360, 129.365, 129.370, 129.380 or 129.385
applies. [2003 c.279 §15]
     129.325
Insurance policies and similar contracts. (1) Except as otherwise provided in subsection (2) of this section, a
trustee shall allocate to principal the proceeds of a life insurance policy or
other contract in which the trust or its trustee is named as beneficiary,
including a contract that insures the trust or its trustee against loss for
damage to, destruction of or loss of title to a trust asset. The trustee shall
allocate dividends on an insurance policy to income if the premiums on the
policy are paid from income and to principal if the premiums are paid from
principal.
     (2) A trustee shall allocate to income
proceeds of a contract that insures the trustee against loss of occupancy or
other use by an income beneficiary, loss of income or, subject to ORS 129.308,
loss of profits from a business.
     (3) This section does not apply to a
contract to which ORS 129.355 applies. [2003 c.279 §16]
(Receipts
Normally Apportioned)
     129.350
Insubstantial allocations not required. If a trustee determines that an allocation between principal and
income required by ORS 129.355, 129.360, 129.365, 129.370 or 129.385 is
insubstantial, the trustee may allocate the entire amount to principal unless
one of the circumstances described in ORS 129.215 (3) applies to the
allocation. This power may be exercised by a cotrustee in the circumstances
described in ORS 129.215 (4) and may be released for the reasons and in the
manner described in ORS 129.215 (5). An allocation is presumed to be
insubstantial if:
     (1) The amount of the allocation would
increase or decrease net income in an accounting period, as determined before
the allocation, by less than 10 percent; or
     (2) The value of the asset producing the
receipt for which the allocation would be made is less than 10 percent of the
total value of the trustÂ’s assets at the beginning of the accounting period. [2003
c.279 §17]
     129.355
Deferred compensation, annuities and similar payments. (1) In this section, “payment” means a
payment that a trustee may receive over a fixed number of years or during the
life of one or more individuals because of services rendered or property
transferred to the payer in exchange for future payments. The term includes a
payment made in money or property from the payerÂ’s general assets or from a
separate fund created by the payer, including a private or commercial annuity,
an individual retirement account and a pension, profit-sharing, stock-bonus or
stock-ownership plan.
     (2) Except as provided in subsection (5)
of this section, to the extent that a payment is characterized as interest or a
dividend or a payment made in lieu of interest or a dividend, a trustee shall
allocate it to income. The trustee shall allocate to principal the balance of
the payment and any other payment received in the same accounting period that
is not characterized as interest, a dividend or an equivalent payment.
     (3) Except as provided in subsection (5)
of this section, if no part of a payment is characterized as interest, a
dividend or an equivalent payment, and all or part of the payment is required
to be made, a trustee shall allocate to income 10 percent of the part that is
required to be made during the accounting period and the balance to principal.
If no part of a payment is required to be made or the payment received is the
entire amount to which the trustee is entitled, the trustee shall allocate the
entire payment to principal. For purposes of this subsection, a payment is not “required
to be made” to the extent that it is made because the trustee exercises a right
of withdrawal.
     (4) If, to obtain an estate tax marital
deduction for a trust, a trustee must allocate more of a payment to income than
provided for by this section, the trustee shall allocate to income the
additional amount necessary to obtain the marital deduction.
     (5)(a) An increase in value of the
following obligations over the value of the obligations at the time of
acquisition by the trust is distributable as income:
     (A) A zero coupon security.
     (B) A deferred annuity contract surrendered
wholly or partially before annuitization.
     (C) A life insurance contract surrendered
wholly or partially before the death of the insured.
     (D) Any other obligation for the payment
of money that is payable at a future time in accordance with a fixed, variable
or discretionary schedule of appreciation in excess of the price at which it
was issued.
     (b) For purposes of this subsection, the
increase in value of an obligation is available for distribution only when the
trustee receives cash on account of the obligation. If the obligation is
surrendered or partially liquidated, the cash available must be attributed
first to the increase. The increase is distributable to the income beneficiary
who is the beneficiary at the time the cash is received.
     (6) This section does not apply to
payments to which ORS 129.360 applies. [2003 c.279 §18]
     129.360
Liquidating asset. (1) In
this section, “liquidating asset” means an asset whose value will diminish or
terminate because the asset is expected to produce receipts for a period of
limited duration. The term includes a leasehold, patent, copyright, royalty
right and right to receive payments during a period of more than one year under
an arrangement that does not provide for the payment of interest on the unpaid
balance. The term does not include a payment subject to ORS 129.355, resources
subject to ORS 129.365, timber subject to ORS 129.370, an activity subject to
ORS 129.380, an asset subject to ORS 129.385 or any asset for which the trustee
establishes a reserve for depreciation under ORS 129.410.
     (2) A trustee shall allocate to income 10
percent of the receipts from a liquidating asset and the balance to principal. [2003
c.279 §19]
     129.365
Minerals, water and other natural resources. (1) To the extent that a trustee accounts for receipts from an
interest in minerals or other natural resources pursuant to this section, the
trustee shall allocate them as follows:
     (a) If received as nominal delay rental or
nominal annual rent on a lease, a receipt must be allocated to income.
     (b) If received from a production payment,
a receipt must be allocated to income if and to the extent that the agreement
creating the production payment provides a factor for interest or its
equivalent. The balance must be allocated to principal.
     (c) If an amount received as a royalty,
shut-in-well payment, take-or-pay payment, bonus or delay rental is more than
nominal, 90 percent must be allocated to principal and the balance to income.
     (d) If an amount is received from a
working interest or any other interest not provided for in paragraph (a), (b)
or (c) of this subsection, 90 percent of the net amount received must be
allocated to principal and the balance to income.
     (2) An amount received on account of an
interest in water that is renewable must be allocated to income. If the water
is not renewable, 90 percent of the amount must be allocated to principal and
the balance to income.
     (3) This chapter applies whether or not a
decedent or donor was extracting minerals, water or other natural resources
before the interest became subject to the trust.
     (4) If a trust owns an interest in
minerals, water or other natural resources on January 1, 2004, the trustee may
allocate receipts from the interest as provided in this chapter or in the
manner used by the trustee before January 1, 2004. If the trust acquires an
interest in minerals, water or other natural resources after January 1, 2004,
the trustee shall allocate receipts from the interest as provided in this
chapter. [2003 c.279 §20]
     129.370
Timber. (1) To the extent
that a trustee accounts for receipts from the sale of timber and related
products pursuant to this section, the trustee shall allocate the net receipts:
     (a) To income to the extent that the
amount of timber removed from the land does not exceed the rate of growth of
the timber during the accounting periods in which a beneficiary has a mandatory
income interest;
     (b) To principal to the extent that the
amount of timber removed from the land exceeds the rate of growth of the timber
or the net receipts are from the sale of standing timber;
     (c) To or between income and principal if
the net receipts are from the lease of timberland or from a contract to cut
timber from land owned by a trust, by determining the amount of timber removed
from the land under the lease or contract and applying the rules in paragraphs
(a) and (b) of this subsection; or
     (d) To principal to the extent that
advance payments, bonuses and other payments are not allocated pursuant to
paragraph (a), (b) or (c) of this subsection.
     (2) In determining net receipts to be
allocated pursuant to subsection (1) of this section, a trustee shall deduct
and transfer to principal a reasonable amount for depletion.
     (3) This chapter applies whether or not a
decedent or transferor was harvesting timber from the property before it became
subject to the trust.
     (4) If a trust owns an interest in
timberland on January 1, 2004, the trustee may allocate net receipts from the
sale of timber and related products as provided in this chapter or in the
manner used by the trustee before January 1, 2004. If the trust acquires an
interest in timberland after January 1, 2004, the trustee shall allocate net
receipts from the sale of timber and related products as provided in this
chapter. [2003 c.279 §21]
     129.375
Property not productive of income. (1) If a marital deduction is allowed for all or part of a trust whose
assets consist substantially of property that does not provide the spouse with
sufficient income from or use of the trust assets, and if the amounts that the
trustee transfers from principal to income under ORS 129.215 and distributes to
the spouse from principal pursuant to the terms of the trust are insufficient
to provide the spouse with the beneficial enjoyment required to obtain the
marital deduction, the spouse may require the trustee to make property
productive of income, convert property within a reasonable time or exercise the
power conferred by ORS 129.215 (1). The trustee may decide which action or
combination of actions to take.
     (2) In cases not governed by subsection
(1) of this section, proceeds from the sale or other disposition of an asset
are principal without regard to the amount of income the asset produces during
any accounting period. [2003 c.279 §22]
     129.380
Derivatives and options. (1)
In this section, “derivative” means a contract or financial instrument or a
combination of contracts and financial instruments which gives a trust the
right or obligation to participate in some or all changes in the price of a
tangible or intangible asset or group of assets, or changes in a rate, an index
of prices or rates, or other market indicator for an asset or a group of
assets.
     (2) To the extent that a trustee does not
account under ORS 129.308 for transactions in derivatives, the trustee shall
allocate to principal receipts from and disbursements made in connection with
those transactions.
     (3) If a trustee grants an option to buy
property from the trust, whether or not the trust owns the property when the
option is granted, grants an option that permits another person to sell
property to the trust or acquires an option to buy property for the trust or an
option to sell an asset owned by the trust, and the trustee or other owner of
the asset is required to deliver the asset if the option is exercised, an
amount received for granting the option must be allocated to principal. An
amount paid to acquire the option must be paid from principal. A gain or loss
realized upon the exercise of an option, including an option granted to a
settlor of the trust for services rendered, must be allocated to principal. [2003
c.279 §23]
     129.385
Asset-backed securities. (1)
In this section, “asset-backed security” means an asset whose value is based
upon the right it gives the owner to receive distributions from the proceeds of
financial assets that provide collateral for the security. The term includes an
asset that gives the owner the right to receive from the collateral financial
assets only the interest or other current return or only the proceeds other
than interest or current return. The term does not include an asset to which
ORS 129.300 or 129.355 applies.
     (2) If a trust receives a payment from
interest or other current return and from other proceeds of the collateral
financial assets, the trustee shall allocate to income the portion of the
payment which the payer identifies as being from interest or other current
return and shall allocate the balance of the payment to principal.
     (3) If a trust receives one or more
payments in exchange for the trustÂ’s entire interest in an asset-backed
security in one accounting period, the trustee shall allocate the payments to
principal. If a payment is one of a series of payments that will result in the
liquidation of the trustÂ’s interest in the security over more than one
accounting period, the trustee shall allocate 10 percent of the payment to
income and the balance to principal. [2003 c.279 §24]
ALLOCATION OF
DISBURSEMENTS DURING ADMINISTRATION OF TRUST
     129.400
Disbursements from income. A
trustee shall make the following disbursements from income to the extent that
they are not disbursements to which ORS 129.250 (2)(b) or (c) applies:
     (1) One-half of the regular compensation
of the trustee and of any person providing investment advisory or custodial
services to the trustee;
     (2) One-half of all expenses for
accountings, judicial proceedings or other matters that involve both the income
and remainder interests;
     (3) All of the other ordinary expenses
incurred in connection with the administration, management or preservation of
trust property and the distribution of income, including interest, ordinary
repairs, regularly recurring taxes assessed against principal and expenses of a
proceeding or other matter that concerns primarily the income interest; and
     (4) Recurring premiums on insurance
covering the loss of a principal asset or the loss of income from or use of the
asset. [2003 c.279 §25]
     129.405
Disbursements from principal.
(1) A trustee shall make the following disbursements from principal:
     (a) The remaining one-half of the
disbursements described in ORS 129.400 (1) and (2);
     (b) All of the trustee’s compensation
calculated on principal as a fee for acceptance, distribution or termination
and disbursements made to prepare property for sale;
     (c) Payments on the principal of a trust
debt;
     (d) Expenses of a proceeding that concerns
primarily principal, including a proceeding to construe the trust or to protect
the trust or its property;
     (e) Premiums paid on a policy of insurance
not described in ORS 129.400 (4) of which the trust is the owner and
beneficiary;
     (f) Estate, inheritance and other transfer
taxes, including penalties, apportioned to the trust; and
     (g) Disbursements related to environmental
matters, including reclamation, assessing environmental conditions, remedying
and removing environmental contamination, monitoring remedial activities and
the release of substances, preventing future releases of substances, collecting
amounts from persons liable or potentially liable for the costs of those
activities, penalties imposed under environmental laws or regulations and other
payments made to comply with those laws or regulations, statutory or common law
claims by third parties and defending claims based on environmental matters.
     (2) If a principal asset is encumbered
with an obligation that requires income from that asset to be paid directly to
the creditor, the trustee shall transfer from principal to income an amount
equal to the income paid to the creditor in reduction of the principal balance
of the obligation. [2003 c.279 §26]
     129.410
Transfers from income to principal for depreciation. (1) In this section, “depreciation” means a
reduction in value due to wear, tear, decay, corrosion or gradual obsolescence
of a fixed asset having a useful life of more than one year.
     (2) A trustee may transfer to principal a
reasonable amount of the net cash receipts from a principal asset that is
subject to depreciation, but may not transfer any amount for depreciation:
     (a) Of that portion of real property used
or available for use by a beneficiary as a residence or of tangible personal
property held or made available for the personal use or enjoyment of a
beneficiary;
     (b) During the administration of a
decedentÂ’s estate; or
     (c) Under this section if the trustee is
accounting under ORS 129.308 for the business or activity in which the asset is
used.
     (3) An amount transferred to principal
need not be held as a separate fund. [2003 c.279 §27]
     129.415
Transfers from income to reimburse principal. (1) If a trustee makes or expects to make a principal disbursement
described in this section, the trustee may transfer an appropriate amount from
income to principal in one or more accounting periods to reimburse principal or
to provide a reserve for future principal disbursements.
     (2) Principal disbursements to which
subsection (1) of this section applies include the following, but only to the
extent that the trustee has not been and does not expect to be reimbursed by a
third party:
     (a) An amount chargeable to income but
paid from principal because it is unusually large, including extraordinary
repairs;
     (b) A capital improvement to a principal
asset, whether in the form of changes to an existing asset or the construction
of a new asset, including special assessments;
     (c) Disbursements made to prepare property
for rental, including tenant allowances, leasehold improvements and brokerÂ’s
commissions;
     (d) Periodic payments on an obligation
secured by a principal asset to the extent that the amount transferred from
income to principal for depreciation is less than the periodic payments; and
     (e) Disbursements described in ORS 129.405
(1)(g).
     (3) If the asset whose ownership gives
rise to the disbursements becomes subject to a successive income interest after
an income interest ends, a trustee may continue to transfer amounts from income
to principal as provided in subsection (1) of this section. [2003 c.279 §28]
     129.420
Income taxes. (1) A tax
required to be paid by a trustee based on receipts allocated to income must be
paid from income.
     (2) A tax required to be paid by a trustee
based on receipts allocated to principal must be paid from principal, even if
the tax is called an income tax by the taxing authority.
     (3) A tax required to be paid by a trustee
on the trustÂ’s share of an entityÂ’s taxable income must be paid
proportionately:
     (a) From income to the extent that
receipts from the entity are allocated to income; and
     (b) From principal to the extent that:
     (A) Receipts from the entity are allocated
to principal; and
     (B) The trust’s share of the entity’s
taxable income exceeds the total receipts described in paragraph (a) of this
subsection and subparagraph (A) of this paragraph.
     (4) For purposes of this section, receipts
allocated to principal or income must be reduced by the amount distributed to a
beneficiary from principal or income for which the trust receives a deduction
in calculating the tax. [2003 c.279 §29]
     129.425
Adjustments between principal and income because of taxes. (1) A fiduciary may make adjustments between
principal and income to offset the shifting of economic interests or tax
benefits between income beneficiaries and remainder beneficiaries which arise
from:
     (a) Elections and decisions, other than
those described in subsection (2) of this section, that the fiduciary makes
from time to time regarding tax matters;
     (b) An income tax or any other tax that is
imposed upon the fiduciary or a beneficiary as a result of a transaction
involving or a distribution from the estate or trust; or
     (c) The ownership by an estate or trust of
an interest in an entity whose taxable income, whether or not distributed, is
includable in the taxable income of the estate, trust or a beneficiary.
     (2) If the amount of an estate tax marital
deduction or charitable contribution deduction is reduced because a fiduciary
deducts an amount paid from principal for income tax purposes instead of
deducting it for estate tax purposes, and as a result estate taxes paid from
principal are increased and income taxes paid by an estate, trust or
beneficiary are decreased, each estate, trust or beneficiary that benefits from
the decrease in income tax shall reimburse the principal from which the
increase in estate tax is paid. The total reimbursement must equal the increase
in the estate tax to the extent that the principal used to pay the increase
would have qualified for a marital deduction or charitable contribution
deduction but for the payment. The proportionate share of the reimbursement for
each estate, trust or beneficiary whose income taxes are reduced must be the
same as its proportionate share of the total decrease in income tax. An estate
or trust shall reimburse principal from income. [2003 c.279 §30]
UNIFORMITY OF
APPLICATION
     129.450
Uniformity of application and construction. In applying and construing this chapter, consideration must be given
to the need to promote uniformity of the law with respect to its subject matter
among states that enact it. [2003 c.279 §31]
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