Allocation of certain payments received because of services rendered or property transferred to payor in exchange for future payments to income or principal, or both.
1. As used in this section, “payment” means a payment that a trustee may receive over a fixed number of years or during the life of one or more natural persons because of services rendered or property transferred to the payor in exchange for future payments. The term includes a payment made in money or property from the payor’s general assets or from a separate fund created by the payor, including a private or commercial annuity, an individual retirement account, and a pension, profit-sharing, stock-bonus or stock-ownership plan.
2. To the extent that a payment is characterized as interest or a dividend or a payment made in lieu of interest or a dividend, a trustee shall allocate it to income. He shall allocate to principal the balance of the payment and any other payment received in the same accounting period that is not characterized as interest, a dividend or an equivalent payment.
3. If no part of a payment is characterized as interest, a dividend or an equivalent payment, and all or part of the payment is required to be made, a trustee shall allocate to income 10 percent of the part that is required to be made during the accounting period and the balance to principal. If no part of a payment is required to be made or the payment received is the entire amount to which the trustee is entitled, he shall allocate the entire payment to principal. For purposes of this subsection, a payment is not “required to be made” to the extent that it is made because the trustee exercises a right of withdrawal.
4. If, to obtain an estate tax marital deduction for a trust, a trustee must allocate more of a payment to income than provided for by this section, he shall allocate to income the additional amount necessary to obtain the marital deduction.
5. This section does not apply to payments to which NRS 164.870 applies.
Last modified: February 25, 2006