22-3-414 - Receipts normally apportioned -- Derivatives and options.
22-3-414. Receipts normally apportioned -- Derivatives and options.
(1) In this section, "derivative" means a contract or financial instrument or a combinationof contracts and financial instruments which gives a trust the right or obligation to participate insome or all changes in the price of a tangible or intangible asset or group of assets, or changes ina 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 Section 22-3-403 for transactionsin derivatives, the trustee shall allocate to principal receipts from and disbursements made inconnection with those transactions.
(3) If a trustee grants an option to buy property from the trust, whether or not the trustowns the property when the option is granted, grants an option that permits another person to sellproperty to the trust, or acquires an option to buy property for the trust or an option to sell anasset owned by the trust, and the trustee or other owner of the asset is required to deliver the assetif the option is exercised, an amount received for granting the option must be allocated toprincipal. An amount paid to acquire the option must be paid from principal. A gain or lossrealized upon the exercise of an option, including an option granted to a settlor of the trust forservices rendered, must be allocated to principal.
Enacted by Chapter 285, 2004 General Session