(a) Allocation to income.--Except as otherwise provided in this section, a trustee shall allocate to income money received from an entity, including reinvested cash dividends.
(b) Allocation to principal.--A trustee shall allocate the following receipts from an entity to principal:
(1) Property other than money, excluding reinvested cash dividends.
(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.
(4) Money received from an entity that is a regulated investment company or a real estate investment trust if the money distributed is a short-term or long-term capital gain dividend for Federal income tax purposes.
(c) When received in partial liquidation.--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 and property distributed by the entity to its owners in one distribution or a series of related distributions is greater than 20% of the entity's gross assets, as shown by the entity's year-end financial statements immediately preceding the initial receipt.
(d) When not received in partial liquidation.--Money is not received in partial liquidation nor may it be taken into account under subsection (c)(2) to the extent that it does not exceed the amount of income tax that a trust beneficiary must pay on taxable income of the entity that distributes the money.
(e) Reliance upon a statement.--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.
(f) Definition.--As used in this section, the term "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:
(1) a trust or estate to which section 8142 (relating to distribution from trust or estate) applies;
(2) a business or activity to which section 8143 (relating to business and other activities conducted by trustee) applies;
(3) a payment to which section 8149 (relating to retirement benefits, individual retirement accounts, deferred compensation, annuities and similar payments) applies; or
(4) an asset-backed security to which section 8155 (relating to asset-backed securities) applies.
(July 7, 2006, P.L.625, No.98, eff. 60 days)
2006 Amendment. Act 98 amended subsecs. (c) and (d).
Cross References. Section 8141 is referred to in sections 8132, 8142, 8155 of this title.