Transactions in derivatives; granting, acquiring, or exercising an
option
Sec. 36. (a) As used in this section, "derivative" means a contract
or financial instrument or a combination of contracts and financial
instruments that gives a trust the right or obligation to participate in:
(1) some or all changes in the price of a tangible or intangible
asset or group of assets; or
(2) changes in a rate, an index of prices or rates, or other market
indicator for an asset or a group of assets.
(b) To the extent that a trustee does not account under section 25
of this chapter for transactions in derivatives, the trustee shall
allocate to principal receipts from and disbursements made in
connection with those transactions.
(c) If a trustee:
(1) grants an option to buy property from the trust, whether or
not the trust owns the property when the option is granted;
(2) grants an option that permits another person to sell property
to the trust; or
(3) acquires an option to buy property for the trust or an option
to sell an asset owned by the trust;
and the trustee or other owner of the asset is required to deliver the
asset if the option is exercised, an amount received for granting the
option must be allocated to principal. An amount paid to acquire the
option must be paid from principal. A gain or loss realized upon the
exercise of an option, including an option granted to a settlor of the
trust for services rendered, must be allocated to principal.
As added by P.L.84-2002, SEC.2.
Last modified: May 27, 2006