Obligation to pay money to trustee
Sec. 28. (a) An amount received as interest, whether determined
at a fixed, variable, or floating rate, on an obligation to pay money to
the trustee, including an amount received as consideration for
prepaying principal, must be allocated to income without any
provision for amortization of premium.
(b) A trustee shall allocate to principal an amount received from
the sale, redemption, or other disposition of an obligation to pay
money to the trustee more than one (1) year after it is purchased or
acquired by the trustee, including an obligation whose purchase price
or value when it is acquired is less than its value at maturity. If the
obligation matures within one (1) year after it is purchased or
acquired by the trustee, an amount received in excess of its purchase
price or its value when acquired by the trust must be allocated to
income.
(c) Notwithstanding any other provision of this section, when an
obligation described in this section is held as an asset of a charitable
remainder trust, an increase in the value of the obligation over the
value of the obligation at the time of acquisition by the trust is
distributable as income. For purposes of this subsection, the increase
in value is available for distribution only when the trustee receives
cash on account of the obligation. If the obligation is surrendered or
liquidated partially, the cash available shall be attributed first to the
increase. The increase is distributable to the income beneficiary who
is the income beneficiary at the time the cash is received.
(d) This section does not apply to an obligation to which section
31, 32, 33, 34, 36, or 37 of this chapter applies.
As added by P.L.84-2002, SEC.2.
Last modified: May 27, 2006