Cal. Prob. Code § 16350
Allocation of Receipts
Redline — January 1, 2011 → current.View current text →
Current — January 1, 2023
As of January 1, 2011
(a) For the purposes of 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 decedent’s estate to which Section 16351 applies, a business or activity to which Section 16352 applies, or an asset-backed security to which Section 16367 applies.
(b) Except as otherwise provided in this section, a trustee shall allocate to income money received from an entity.
(c) A trustee shall allocate to principal the following receipts from an entity:
(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.
(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) For purposes of paragraph (3) of subdivision (c):
(1) 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 received by all owners, collectively, in a distribution or series of related distributions is greater than 20 percent of the entity’s gross assets, as shown by the entity’s yearend financial statements immediately preceding the initial receipt. If that receipt is allocated between December 2, 2004, and the operative date of the act adding this sentence, a trustee shall not be liable for allocating the receipt to income if the amount received by the trustee, when considered together with the amount received by all owners, collectively, exceeds 20 percent of the entity’s gross assets, but the amount received by the trustee does not exceed 20 percent of the entity’s gross assets.
(2) Money is not received in partial liquidation, nor may it be taken into account under clause (B) of paragraph (1), 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.
(e) A trustee may rely on 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.
(a) To the extent a fiduciary does not account for a receipt from an interest in minerals, water, or other natural resources as a business under Section 16432, the fiduciary shall allocate the receipt in the following manner:
(1) To income, to the extent received:
(A) As delay rental or annual rent on a lease.
(B) As a factor for interest or the equivalent of interest under an agreement creating a production payment.
(C) On account of an interest in renewable water.
(2) To principal, if received from a production payment, to the extent subparagraph (B) of paragraph (1) does not apply.
(3) Between income and principal in a reasonable manner, to the extent received:
(A) On account of an interest in nonrenewable water.
(B) As a royalty, shut-in-well payment, take-or-pay payment, or bonus.
(C) From a working interest or any other interest not provided for in subparagraph (A) or (B), or paragraph (1) or (2).
(b) This section applies to an interest owned or held by a fiduciary whether or not a settlor was extracting minerals, water, or other natural resources before the fiduciary owned or held the interest.
(c) An allocation of a receipt under paragraph (3) of subdivision (a) is presumed to be reasonable if the amount allocated to principal is equal to the amount allowed by the Internal Revenue Code of 1986, as amended (Title 26 of the United States Code, as amended), as a deduction for depletion of the interest.
(d) If a fiduciary owns or holds an interest in minerals, water, or other natural resources before the effective date of this chapter, the fiduciary may allocate receipts from the interest as provided in this section or in the manner used by the fiduciary before the effective date of this chapter. If the fiduciary acquires an interest in minerals, water, or other natural resources on or after the effective date of this chapter, the fiduciary shall allocate receipts from the interest as provided in this section.
Official source: California Legislative Information. Reproduced from public-domain California statutes; confirm against the official source for the current text. Not legal advice.