(a)This section does not apply to a payment
to which section 32 of this chapter applies.
(b)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 (1) or more individuals because of services rendered or property
transferred to the payer in exchange for future payments, regardless of
whether the trustee also has the option to receive the payment in a lump
sum or other form of payment, whether the payment is made in money
or other property, and whether the payment is made from the payer's
general assets or from a separate fund created by the payer. For
purposes of subsection (h), the term also includes any payment from
any separate fund, regardless of the reason for the payment.
(c)As used in this section, "sepa
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(a) This section does not apply to a payment
to which section 32 of this chapter applies.
(b) 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 (1) or more individuals because of services rendered or property
transferred to the payer in exchange for future payments, regardless of
whether the trustee also has the option to receive the payment in a lump
sum or other form of payment, whether the payment is made in money
or other property, and whether the payment is made from the payer's
general assets or from a separate fund created by the payer. For
purposes of subsection (h), the term also includes any payment from
any separate fund, regardless of the reason for the payment.
(c) As used in this section, "separate fund" includes a private or
commercial annuity, an individual retirement account, and a pension,
profit sharing, stock bonus, or stock ownership plan (including an
individual account under a plan and a separate share of any account
described in this subsection).
(d) To the extent that a payment is characterized as interest, a
dividend, or a payment made in lieu of interest or a dividend, a trustee
shall allocate the payment to income. The trustee 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.
(e) If a payment is not characterized as interest, a dividend, or an
equivalent payment and is made from a separate fund, the payment
shall be allocated between income and principal as follows:
(1) A trustee shall determine the internal income of each separate
fund for the accounting period as if the separate fund were a trust
subject to this chapter. The trustee shall allocate a payment from
the separate fund to income to the extent of the internal income of
the separate fund and allocate the balance of the payment to
principal.
(2) If a trustee cannot determine the internal income of the
separate fund but can determine the value of the separate fund,
the internal income of the separate fund is deemed to equal five
percent (5%) of the fund's value, according to the most recent
statement of value preceding the beginning of the accounting
period. If the trustee cannot determine the internal income of the
separate fund or the fund's value, the internal income of the fund
is deemed to equal the product of the interest rate and the present
value of the expected future payments, as determined under
section 7520 of the Internal Revenue Code, for the month
preceding the accounting period for which the computation is
made.
(f) If no part of a payment is characterized as interest, a dividend, or
an equivalent payment, and the payment is made otherwise than from
a separate fund, then the trustee shall allocate to income ten percent
(10%) of any part of the payment that is required to be made during the
accounting period and the balance to principal, unless no part of the
payment is required to be made or the payment received is the entire
amount to which the trustee is entitled, in which case the trustee 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.
(g) Notwithstanding any other provision of this section, when a
private or commercial deferred annuity 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 the 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
exercises a right of withdrawal or otherwise receives cash on account
of the obligation. If the obligation is surrendered wholly or partially
before annuitization, 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.
(h) Except as provided in subdivision (2), trusts described in
subdivision (1) are subject to the following special rules regarding
allocations and distributions of income provided in subdivision (3):
(1) This subsection applies to:
(A) a trust to which an election to qualify for a marital
deduction under Section 2056(b)(7) of the Internal Revenue
Code has been made; or
(B) a trust that qualifies for the marital deduction under Section
2056(b)(5) of the Internal Revenue Code.
(2) This subsection does not apply to a series of payments if and
to the extent that the series of payments would, without the
application of this subsection, qualify for the marital deduction
under Section 2056(b)(7)(C) of the Internal Revenue Code.
(3) Except as provided in subdivision (2), a payment made from
a separate fund to a trust described in subdivision (1) shall be
allocated between income and principal in accordance with
subsection (e)(1) and (e)(2) and not in accordance with subsection
(d) or (f), even if part or all of the payment is characterized as
interest, a dividend, or an equivalent payment, and even if the
payment is the entire amount to which the trustee is entitled. The
trustee shall distribute to the surviving spouse the part of the
payment allocated to income. Upon request of the surviving
spouse, the trustee shall demand that the person administering the
separate fund distribute all of the internal income of the fund to
the trust. Upon request of the surviving spouse, the trustee shall
allocate principal to income to the extent the internal income of
the separate fund exceeds payments from the separate fund to the
trust during the accounting period.