22-3-401 - Receipts from entities -- Character of receipts.
22-3-401. Receipts from entities -- 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 otherorganization in which a trustee has an interest other than a trust or estate to which Section22-3-402 applies, a business or activity to which Section 22-3-403 applies, or an asset-backedsecurity to which Section 22-3-415 applies.
(2) Except as otherwise provided in this section, a trustee shall allocate to income moneyreceived 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 forpart or all of a trust'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 estateinvestment trust if the money distributed is a capital gain dividend for federal income taxpurposes.
(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 adistribution in partial liquidation; or
(b) if the total amount of money and property received in a distribution or series ofrelated distributions is greater than 20% of the entity's gross assets, as shown by the entity'syear-end financial statements immediately preceding the initial receipt.
(5) Money is not received in partial liquidation, nor may it be taken into account underSubsection (4)(b), to the extent that it does not exceed the amount of income tax that a trustee orbeneficiary 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 characterof a distribution if the statement is made at or near the time of distribution by the entity's board ofdirectors or other person or group of persons authorized to exercise powers to pay money ortransfer property comparable to those of a corporation's board of directors.
Enacted by Chapter 285, 2004 General Session