(a) Allocation of net receipts.--To the extent that a trustee accounts for receipts from the sale of timber and related products under this section, the trustee shall allocate the net receipts:
(1) 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.
(2) To principal to the extent that:
(i) the amount of timber removed from the land exceeds the rate of growth of the timber; or
(ii) the net receipts are from the sale of standing timber.
(3) To or between income and principal, by determining the amount of timber removed from the land under the lease or contract and applying the rules in paragraphs (1) and (2) if the net receipts are from:
(i) the lease of timberland; or
(ii) a contract to cut timber from land owned by a trust.
(4) To principal to the extent that advance payments, bonuses and other payments are not allocated under paragraph (1), (2) or (3).
(b) Determining net receipts.--In determining net receipts to be allocated under subsection (a), a trustee shall deduct and transfer to principal a reasonable amount for depletion.
(c) Application.--This chapter applies whether or not a decedent or transferor was harvesting timber from the property before it became subject to the trust.