’WPCS W8ų{ŁFĪĒōyö@åW —,Äō«Š@7DD5wžĄaąeÖęu4SYŃõ«ó'ŗ”—”–f)E8»Ģ–wŸŠŚ~ˆFyĘ·*~Ą5+‡ļ72InŽķ:™hLæ˜ī·avĀ<WĖ3’Ņ÷z³®ĪÉ' ģŸ„—‚ŸK:¢ql'‡°óßÄ„Į®<Į(KüZæ*÷Ÿ©GéæƒKd=õÕp¼#ūĆO²g[‡Ö( xĄ¹×Ųˆ ąpH;°ta‚ĮmĒŖė§"tōtmŠY wįĀ5³żķĖ˜”)Lēˆ– n½“:`įL^ zŌÅjæē¦kNĶtrńK¹¤Ō!Ķ~īzäĆPńYĮ‘ō÷OfVńćĆ8w@ÜĀŲƒRš>øbā`]įtåW·ŗ*hŗM ü0LPēēAŻ×õĀ2zč‡:\†¬6RA6š¬CE[š YÕŽĖÖ¶ų0:ɘś½é{;ĪWÄćnāļŠānĀ¦éN“ŒC·™Ų#„W3Œ­Mdš^ŠŽ½ Ö ŪRŁĢT±$ļ­ĪÅ'”„gģ@£-Œl柚g”Ōkż‡ĄžˆnZ(ŗ›ŗ]:wQ`VYkå²6h±4²É*B9Q",³Ā›ō÷Ī#Įą UN” %ļ 0Zõ wO 4S g v mx 0v ”   f™a›NÆ^ ± 0½½ 0Dz¾¾¾¾¾¾¾¾¾¾¾¾¾¾¾ŃĘ 0®— 0DEEE 0v‰‰‰‰‰‰‰‰‰‰‰ B’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’ B C9˜0(ČhH  Z‹6Times New Roman RegularX(22Ķ$””ŃX°ŃÓ  ÓŌ  ŌŃ  ŃzP¦. Fil¼3|x’U‹’ĄĄĄ(N3é$§§Ż ƒ2Ķ!ŻŃX°ŃÓ  ÓŌ  ŌŃ  ŃŻ  Ż ŠŻ ƒ é'ŻÓ  ÓŌ  ŌŻ  ŻŌ_ŌŅ,°ŅŅ,°Ņą@č č Čąņ ņSam€K.€Ō_ŌHildebrandŌ_Ōššs€Comparison€of€New€Texas€Uniform€Principal€and€Income€ActˆŠ , Šą@Čąand€Current€Texas€Principal€and€Income€Statutesˆą€b.b.b.d2ąPage€Ś  Ś1Ś  Ś€of€Ś  Ś29Ś  Śó óüFTABLE AHŒĶ. (p%2é?$¤¤Ż ƒ2Ķ!ŻŃX°ŃÓ  ÓŌ  ŌŃ  ŃŻ  ŻŌ€ōwąXXŌņņŚ  Ś0Ś  Śóóą  ą(#Ć$ņņŚ  Ś0Ś  Śóó  ĒŻ ƒ$®č%ŻÓ  ÓŌ  ŌŌ€ōwąXXŌŚ  Ś1Ś  Ś.Ż  ŻŌ_ŌŌ_ŌV.T.C.A.Ō_Ō€Property€Code,€šš€111.001€et€seq.(m2®č$„„Ż ƒ2Ķ!ŻŃX°ŃÓ  ÓŌ  ŌŃ  ŃŻ  ŻŌ€ōwąXXŌŚ  Ś0Ś  Ś.($Ó$‘‘ņņŚ  Ś0Ś  Śóó(N3é$©©Ż ƒ2Ķ!ŻŃX°ŃÓ  ÓŌ  ŌŃ  ŃŻ  Ż dö’  d ’’’dŻ ƒ2Ķ!ŻŃX°ŃÓ  ÓŌ  ŌŃ  ŃŻ  ŻŌ_ŌŃ,°ŃŌ€ōwąXXŌŃ,XŃŅ,°ŅŅ,°ŅŃTRP$Ų'3 Letter LandscapeXą3Ų' LetterŲ'3 Letter Landscape’3Ų'TŃÖ€ ’’ÖÓ XX§ń°œXÓŌ*‹ƒ3ddd Xdd Xdd X,d2,d2‹ŌŌ,udd!ŌŌ,/ dd!ŌŌ,”dd!ŌŌ+  ŌŠ 4€‹čč €€„„4ŠChapter€116.€€Uniform€Principal€and€Income€Act€Š A€‹,!Ld"‹ „„AŠCommentsŠ A€‹,!Ld"‹ „„AŠCurrent€Texas€Trust€Code/Texas€Probate€Code*Š @6&Ld"  ‹ €€„„@Šņ ņŌ_ŌSubchapterŌ_Ō€A.ą0 E ąDefinitions,€Fiduciary€Duties€and€OtherŠ ©Į ŠMiscellaneous€Provisionsó ó€Š 1'rŠE=E= „„1ŠŠ '©Į „„'ŠŠ 1'©Į  €€„„1Šņ ņSECTION€116.001.SHORT€TITLE.ó óŠ Ļē Šą  ąThis€chapter€may€be€cited€as€the€Uniform€Principal€and€IncomeŠ ˜°  ŠAct.Š 'a y  „„'ŠŠ 'Ļē  „„'ŠŠ 1'Ļē   €€„„1Šņ ņSECTION€116.002.DEFINITIONS.ó óIn€this€chapter:Š ¾ Ö  Šą  ąą r ą(1)š šAccounting€periodšš€means€a€calendar€year€unlessŠ ‡ Ÿ Šanother€12„month€period€is€selected€by€a€fiduciary.The€termŠ P h Šincludes€a€portion€of€a€calendar€year€or€other€12„month€period€thatŠ  1  Šbegins€when€an€income€interest€begins€or€ends€when€an€incomeŠ ā ś  Šinterest€ends.Š «Ć  Šą  ąą r ą(2)š šBeneficiaryšš€includes,€in€the€case€of€a€decedentššs€estate,Š tŒ  Šan€heir,€legatee,€and€devisee€and,€in€the€case€of€a€trust,€an€incomeŠ =U  Šbeneficiary€and€a€remainder€beneficiary.Š   Šą  ąą r ą(3)š šFiduciaryšš€means€a€personal€representative€or€aŠ Ļē  Štrustee.The€term€includes€an€executor,€administrator,€successorŠ ˜° Špersonal€representative,€special€administrator,€and€a€personŠ ay Šperforming€substantially€the€same€function.Š *B Šą  ąą r ą(4)š šIncomešš€means€money€or€property€that€a€fiduciaryŠ ó  Šreceives€as€current€return€from€a€principal€asset.The€term€includesŠ ¼Ō Ša€portion€of€receipts€from€a€sale,€exchange,€or€liquidation€of€aŠ … Šprincipal€asset,€to€the€extent€provided€in€Ō_ŌSubchapterŌ_Ō€D.Š Nf Šą  ąą r ą(5)š šIncome€beneficiaryšš€means€a€person€to€whom€net€incomeŠ / Šof€a€trust€is€or€may€be€payable.Š ąų Šą  ąą r ą(6)š šIncome€interestšš€means€the€right€of€an€incomeŠ ©Į  Šbeneficiary€to€receive€all€or€part€of€net€income,€whether€the€terms€ofŠ rŠ! Šthe€trust€require€it€to€be€distributed€or€authorize€it€to€be€distributedŠ ;S" Šin€the€trusteeššs€discretion.Š # Šą  ąą r ą(7)š šMandatory€income€interestšš€means€the€right€of€anŠ Ķå$ Šincome€beneficiary€to€receive€net€income€that€the€terms€of€the€trustŠ –®% Šrequire€the€fiduciary€to€distribute.Š _w& Šą  ąą r ą(8)š šNet€incomešš€means€the€total€receipts€allocated€to€incomeŠ (@' Šduring€an€accounting€period€minus€the€disbursements€made€fromŠ ń ( Šincome€during€the€period,€plus€or€minus€transfers€under€this€chapterŠ ŗ Ņ) Što€or€from€income€during€the€period.Š ƒ!›* Šą  ąą r ą(9)š šPersonšš€means€an€individual,€corporation,€business€trust,Š L"d+ Šestate,€trust,€partnership,€limited€liability€company,€association,€jointŠ #-, Šventure,€government;€governmental€subdivision,€agency,€orŠ Ž#ö- ŠŌ& ’ Ōinstrumentality;€public€corporation,€or€any€other€legal€or€commercialŠ §$æ . Šentity.Ō'’§$ÅŌŠ p%ˆ!/ Šą  ąą r ą(10)š šPrincipalšš€means€property€held€in€trust€for€distributionŠ ©d Što€a€remainder€beneficiary€when€the€trust€terminates.Š r- Šą  ąą r ą(11)š šRemainder€beneficiaryšš€means€a€person€entitled€toŠ ;ö Šreceive€principal€when€an€income€interest€ends.Š æ Šą  ąą r ą(12)š šTerms€of€a€trustšš€means€the€manifestation€of€the€intentŠ Ķˆ Šof€a€Ō_ŌsettlorŌ_Ō€or€decedent€with€respect€to€the€trust,€expressed€in€aŠ – Q Šmanner€that€admits€of€its€proof€in€a€judicial€proceeding,€whether€byŠ _  Šwritten€or€spoken€words€or€by€conduct.Š ( ć Šą  ąą r ą(13)š šTrusteešš€includes€an€original,€additional,€or€successorŠ ń ¬  Štrustee,€whether€or€not€appointed€or€confirmed€by€a€court.Š 'ŗ u  „„'ŠŠ ¾ Ö  ŠŠ '©d „„'ŠŠ ¾ Ö ŠŠ (©d  €€(Šņ ņSECTION€116.003.UNIFORMITY€OF€APPLICATION€ANDŠ Ņ ŠCONSTRUCTION.ó óŠ ą›  Šą  ąIn€applying€and€construing€this€Uniform€Act,€consideration€mustŠ ©d  Šbe€given€to€the€need€to€promote€uniformity€of€the€law€with€respect€toŠ r-  Šits€subject€matter€among€states€that€enact€it.Š  ;ö  „„ŠŠ 'Ņ „„'ŠŠ (Ņ  €€(Šņ ņSECTION€116.004.FIDUCIARY€DUTIES;€GENERALŠ ˜S  ŠPRINCIPLES.ó óŠ a  Šą  ą(a)In€allocating€receipts€and€disbursements€to€or€betweenŠ *å  Šprincipal€and€income,€and€with€respect€to€any€matter€within€theŠ ó®  Šscope€of€Ō_ŌSubchaptersŌ_Ō€B€and€C,€a€fiduciary:Š ¼w  Šą  ąą r ą(1)shall€administer€a€trust€or€estate€in€accordance€with€theŠ …@ Šterms€of€thetrust€or€the€will,€even€if€there€is€a€different€provision€inŠ N  Šthis€chapter;Š Ņ Šą  ąą r ą(2)may€administer€a€trust€or€estate€by€the€exercise€of€aŠ ą› Šdiscretionary€power€of€administration€given€to€the€fiduciary€by€theŠ ©d Šterms€of€the€trust€or€the€will,€even€if€the€exercise€of€the€powerŠ r- Šproduces€a€result€different€from€a€result€required€or€permitted€by€thisŠ ;ö Šchapter;Š æ Šą  ąą r ą(3)shall€administer€a€trust€or€estate€in€accordance€with€thisŠ Ķˆ Šchapter€if€the€terms€of€the€trust€or€the€will€do€not€contain€a€differentŠ –Q Šprovision€or€do€not€give€the€fiduciary€a€discretionary€power€ofŠ _ Šadministration;€andŠ (ć Šą  ąą r ą(4)shall€add€a€receipt€or€charge€a€disbursement€to€principalŠ ń¬ Što€the€extent€that€the€terms€of€the€trust€and€this€chapter€do€notŠ ŗ u Šprovide€a€rule€for€allocating€the€receipt€or€disbursement€to€orŠ ƒ!> Šbetween€principal€and€income.Š L" Šą  ą(b)In€exercising€the€power€to€adjust€under€Section€116.005(a)€orŠ #Š Ša€discretionary€power€of€administration€regarding€a€matter€within€theŠ Ž#™ Šscope€of€this€chapter,€whether€granted€by€the€terms€of€a€trust,€a€will,Š §$b  Šor€this€chapter,€a€fiduciary€shall€administer€a€trust€or€estateŠ p%+ ! Šimpartially,€based€on€what€is€fair€and€reasonable€to€all€of€theŠ ©d Šbeneficiaries,€except€to€the€extent€that€the€terms€of€the€trust€or€theŠ r- Šwill€clearly€manifest€an€intention€that€the€fiduciary€shall€or€mayŠ ;ö Šfavor€one€or€more€of€the€beneficiaries.A€determination€inŠ æ Šaccordance€with€this€chapter€is€presumed€to€be€fair€and€reasonable€toŠ Ķˆ Šall€of€the€beneficiaries.Š  – Q „„ŠCompare€(a)(4)€of€the€Uniform€Act€to€(a)(3)€ofŠ ˜S  Šthe€Texas€Trust€Code.€€The€Uniform€Act€defaultsŠ a Što€principal€allocations.€€The€Texas€Trust€CodeŠ *å  Šdefaults€to€a€reasonable€and€equitable€standard.€Š ó®  ŠBut€see€Section€104€of€the€Uniform€Act.Š ¼w  ŠThe€Uniform€Act€states€the€common€lawŠ …@  Šprincipal€of€impartiality.Š N   ŠThe€Uniform€Act€provides€that€following€theŠ Ņ ŠUniform€Act€is€a€safe€harbor€when€a€fiduciaryŠ ą› Šexercises€discretionary€authority.€€In€contrast,Š ©d Šthe€Texas€Trust€Code€merely€says€that€noŠ r- Šinferences€is€to€be€made€when€a€fiduciaryŠ ;ö Šexercises€discretionary€authority€in€a€mannerŠ æ Šcontrary€to€the€Texas€Trust€Code.Š Ķˆ ŠŠ '©d „„'Šņ ņšš€113.101.€€Duty€of€Trustee€as€to€Receipts€and€Expendituresó óŠ ˜S  Šą %" ą(a)A€trustee€shall€administer€the€trust€with€due€regard€for€theŠ a Šinterests€of€income€beneficiaries€and€Ō_ŌremaindermenŌ_Ō€with€respectŠ *å Što€the€allocation€of€receipts€and€expenditures€by€crediting€aŠ ó® Šreceipt€or€charging€an€expenditure€to€income€or€principal€orŠ ¼w Špartly€to€each:Š …@ Šą %" ą(1)in€accordance€with€the€terms€of€the€trust€instrument;Š N  Šą %" ą(2)in€the€absence€of€any€contrary€terms€of€the€trustŠ Ņ  Šinstrument,€in€accordance€with€this€subtitle;€orŠ ą›  Šą %" ą(3)if€neither€of€the€preceding€rules€of€administration€isŠ ©d  Šapplicable,€in€accordance€with€what€is€reasonable€and€equitableŠ r-  Šin€view€of€the€interests€of€those€entitled€to€income€and€toŠ ;ö  Šprincipal.Š æ Šą %" ą(b)If€the€trust€instrument€gives€the€trustee€discretion€inŠ Ķˆ Šcrediting€a€receipt€or€charging€an€expenditure€to€income€orŠ –Q Šprincipal€or€partly€to€each,€no€inference€arises€from€the€fact€thatŠ _ Šthe€trustee€makes€an€allocation€contrary€to€this€subtitle.Š (ć ŠŠ (©d  €€(Šņ ņSECTION€116.005.TRUSTEEššS€POWER€TO€ADJUST.ó óŠ ó ® Šą  ą(a)A€trustee€may€adjust€between€principal€and€income€to€theŠ ¼ w Šextent€the€trustee€considers€necessary€if€the€trustee€invests€andŠ … @ Šmanages€trust€assets€as€a€prudent€investor,€the€terms€of€the€trustŠ N  Šdescribe€the€amount€that€may€or€must€be€distributed€to€a€beneficiaryŠ Ņ Šby€referring€to€the€trustššs€income,€and€the€trustee€determines,€afterŠ ą›  Šapplying€the€rules€in€Section€116.004(a),€that€the€trustee€is€unable€toŠ ©d  Šcomply€with€Section€116.004(b).€€The€power€to€adjust€conferred€byŠ r-  Šthis€subsection€includes€the€power€to€allocate€all€or€part€of€a€capitalŠ ;ö  Šgain€to€trust€income.Š æ  Šą  ą(b)In€deciding€whether€and€to€what€extent€to€exercise€the€powerŠ Ķˆ  Šconferred€by€Subsection€(a),€a€trustee€shall€consider€all€factorsŠ –Q  Šrelevant€to€the€trust€and€its€beneficiaries,€including€the€followingŠ _ Šfactors€to€the€extent€they€are€relevant:Š (ć Šą  ąą r ą(1)the€nature,€purpose,€and€expected€duration€of€the€trust;Š ń¬ Šą  ąą r ą(2)the€intent€of€the€Ō_ŌsettlorŌ_Ō;Š ŗu Šą  ąą r ą(3)the€identity€and€circumstances€of€the€beneficiaries;Š ƒ> Šą  ąą r ą(4)the€needs€for€liquidity,€regularity€of€income,€andŠ L Špreservation€and€appreciation€of€capital;Š Š Šą  ąą r ą(5)the€assets€held€in€the€trust;€the€extent€to€which€theyŠ Ž™ Šconsist€of€financial€assets,€interests€in€closely€held€enterprises,Š §b Štangible€and€intangible€personal€property,€or€real€property;€theŠ p+ Šextent€to€which€an€asset€is€used€by€a€beneficiary;€and€whether€anŠ 9ō Šasset€was€purchased€by€the€trustee€or€received€from€the€Ō_ŌsettlorŌ_Ō;Š ½ Šą  ąą r ą(6)the€net€amount€allocated€to€income€under€the€otherŠ Ė† Šsections€of€this€chapter€and€the€increase€or€decrease€in€the€value€ofŠ ”O Šthe€principal€assets,€which€the€trustee€may€estimate€as€to€assets€forŠ ] Šwhich€market€values€are€not€readily€available;Š & į Šą  ąą r ą(7)whether€and€to€what€extent€the€terms€of€the€trust€give€theŠ ļ Ŗ Štrustee€the€power€to€invade€principal€or€accumulate€income€orŠ ø!s Šprohibit€the€trustee€from€invading€principal€or€accumulating€income,Š "<  Šand€the€extent€to€which€the€trustee€has€exercised€a€power€from€timeŠ J#! Što€time€to€invade€principal€or€accumulate€income;Š $Ī" Šą  ąą r ą(8)the€actual€and€anticipated€effect€of€economic€conditionsŠ Ü$—# Šon€principal€and€income€and€effects€of€inflation€and€deflation;€andŠ „%` $ Šą  ąą r ą(9)the€anticipated€tax€consequences€of€an€adjustment.Š ©d Šą  ą(c)A€trustee€may€not€make€an€adjustment:Š r- Šą  ąą r ą(1)that€diminishes€the€income€interest€in€a€trust€that€requiresŠ ;ö Šall€of€the€income€to€be€paid€at€least€annually€to€a€spouse€and€forŠ æ Šwhich€an€estate€tax€or€gift€tax€marital€deduction€would€be€allowed,Š Ķˆ Šin€whole€or€in€part,€if€the€trustee€did€not€have€the€power€to€make€theŠ – Q Šadjustment;Š _  Šą  ąą r ą(2)that€reduces€the€actuarial€value€of€the€income€interest€inŠ ( ć Ša€trust€to€which€a€person€transfers€property€with€the€intent€to€qualifyŠ ń ¬  Šfor€a€gift€tax€exclusion;Š ŗ u  Šą  ąą r ą(3)that€changes€the€amount€payable€to€a€beneficiary€as€aŠ ƒ >  Šfixed€annuity€or€a€fixed€fraction€of€the€value€of€the€trust€assets;Š L  Šą  ąą r ą(4)from€any€amount€that€is€permanently€set€aside€forŠ Š  Šcharitable€purposes€under€a€will€or€the€terms€of€a€trust€unless€bothŠ Ž™  Šincome€and€principal€are€so€set€aside;Š §b  Šą  ąą r ą(5)if€possessing€or€exercising€the€power€to€make€anŠ p+  Šadjustment€causes€an€individual€to€be€treated€as€the€owner€of€all€orŠ 9ō  Špart€of€the€trust€for€income€tax€purposes,€and€the€individual€wouldŠ ½  Šnot€be€treated€as€the€owner€if€the€trustee€did€not€possess€the€power€toŠ Ė† Šmake€an€adjustment;Š ”O Šą  ąą r ą(6)if€possessing€or€exercising€the€power€to€make€anŠ ] Šadjustment€causes€all€or€part€of€the€trust€assets€to€be€included€forŠ &į Šestate€tax€purposes€in€the€estate€of€an€individual€who€has€the€powerŠ ļŖ Što€remove€a€trustee€or€appoint€atrustee,€or€both,€and€the€assets€wouldŠ øs Šnot€be€included€in€the€estate€of€the€individual€if€the€trustee€did€notŠ < Špossess€the€power€to€make€an€adjustment;Š J Šą  ąą r ą(7)if€the€trustee€is€a€beneficiary€of€the€trust;€orŠ Ī Šą  ąą r ą(8)if€the€trustee€is€not€a€beneficiary,€but€the€adjustmentŠ Ü— Šwould€benefit€the€trustee€directly€or€indirectly.Š „` Šą  ą(d)If€Subsection€(c)€(5),€(6),€(7),€or€(8)€applies€to€a€trustee€andŠ n) Šthere€is€more€than€one€trustee,€a€Ō_ŌcotrusteeŌ_Ō€to€whom€the€provisionŠ 7ņ Šdoes€not€apply€may€make€the€adjustment€unless€the€exercise€of€theŠ »  Špower€by€the€remaining€trustee€or€trustees€is€not€permitted€by€theŠ É„! Šterms€of€the€trust.Š ’M" Šą  ą(e)A€trustee€may€release€the€entire€power€conferred€byŠ [ # Šsubsection€(a)€or€may€release€only€the€power€to€adjust€from€incomeŠ $!ß$ Što€principal€or€the€power€to€adjust€from€principal€to€income€if€theŠ ķ!Ø% Štrustee€is€uncertain€about€whether€possessing€or€exercising€the€powerŠ ¶"q& Šwill€cause€a€result€described€in€Subsection€(c)€(1)€„€(6)€or€(c)€(8)€or€ifŠ #:' Šthe€trustee€determines€that€possessing€or€exercising€the€power€will€orŠ H$( Šmay€deprive€the€trust€of€a€tax€benefit€or€impose€a€tax€burden€notŠ %Ģ) Šdescribed€in€Subsection€(c).The€release€may€be€permanent€or€for€aŠ ©d Šspecified€period,€including€a€period€measured€by€the€life€of€anŠ r- Šindividual.Š ;ö Šą  ą(f)Terms€of€a€trust€that€limit€the€power€of€a€trustee€to€make€anŠ æ Šadjustment€between€principal€and€income€do€not€affect€theŠ Ķˆ Šapplication€of€this€section€unless€it€is€clear€from€the€terms€of€the€trustŠ – Q Šthat€the€terms€are€intended€to€deny€the€trustee€the€power€ofŠ _  Šadjustment€conferred€by€Subsection€(a).Š  ( ć „„ŠSection€104€of€the€Uniform€Act€provides€aŠ ó ®  Šuseful€technique€to€correct€inequities€due€toŠ ¼ w  Šunanticipated€investment€performance.€Š … @  ŠSome€states€have€added€provisions€allowing€theŠ N   Štrustee€to€adopt€a€Ō_ŌunitrustŌ_Ō€approach.€€This€seemsŠ Ņ  Šinappropriate€and€unnecessary,€because€(1)Š ą›  ŠSection€104€allows€a€trustee€to€adopt€a€Ō_ŌunitrustŌ_ŌŠ ©d  Šapproach€and€(2)€the€Uniform€Act€alreadyŠ r-  Šprovides€default€rules.Š ;ö  ŠŠ ©d ŠŠ '©d „„'ŠŠ ó ® ŠŠ ©d ŠŠ (©d  €€(Šņ ņSECTION€116.006.JUDICIAL€CONTROL€OFŠ … @ ŠDISCRETIONARY€POWER.ó óŠ N  Šą  ą(a)The€court€may€not€order€a€trustee€to€change€a€decision€toŠ Ņ Šexercise€or€not€to€exercise€a€discretionary€power€conferred€by€SectionŠ ą›  Š116.005€of€this€chapter€unless€the€court€determines€that€the€decisionŠ ©d  Šwas€an€abuse€of€the€trustee's€discretion.€€A€trustee's€decision€is€not€anŠ r-  Šabuse€of€discretion€merely€because€the€court€would€have€exercisedŠ ;ö  Šthe€power€in€a€different€manner€or€would€not€have€exercised€theŠ æ  Špower.Š Ķˆ  Šą  ą(b)The€decision€to€which€Subsection€(a)€applies€include:Š –Q  Šą  ąą r ą(1)a€decision€under€Section€116.005(a)€as€to€whether€and€toŠ _  Šwhat€extend€an€amount€should€be€transferred€from€principal€toŠ (ć  Šincome€or€from€income€to€principal;€andŠ ń¬ Šą  ąą r ą(2)a€decision€regarding€the€factors€that€are€relevant€to€theŠ ŗu Štrust€and€its€beneficiaries,€the€extent€to€which€the€factors€are€relevant,Š ƒ> Šand€the€weight,€if€any,€to€be€given€to€those€factors,€in€decidingŠ L Šwhether€and€to€what€extent€to€exercise€the€discretionary€powerŠ Š Šconferred€by€Section€116.005(a).Š Ž™ Šą  ą(c)If€the€court€determines€that€a€trustee€has€abused€the€trustee'sŠ §b Šdiscretion,€the€court€may€place€the€income€and€remainderŠ p+ Šbeneficiaries€in€the€positions€they€would€have€occupied€if€theŠ 9ō Šdiscretion€had€not€been€abused,€according€to€the€following€rules:Š ½ Šą  ąą r ą(1)to€the€extent€that€the€abuse€of€discretion€has€resulted€in€noŠ Ė† Šdistribution€to€a€beneficiary€or€in€a€distribution€that€is€too€small,€theŠ ”O Šcourt€shall€order€the€trustee€to€distribute€from€the€trust€to€theŠ ] Šbeneficiary€an€amount€that€the€court€determines€will€restore€theŠ & į Šbeneficiary,€in€whole€or€in€part,€to€the€beneficiary's€appropriateŠ ļ Ŗ Šposition;Š ø!s Šą  ąą r ą(2)to€the€extent€that€the€abuse€of€discretion€has€resulted€in€aŠ "< Šdistribution€to€a€beneficiary€which€is€too€large,€the€court€shall€placeŠ J# Šthe€beneficiaries,€the€trust,€or€both,€in€whole€or€in€part,€in€theirŠ $Ī  Šappropriate€positions€by€ordering€the€trustee€to€withhold€an€amountŠ Ü$—! Šfrom€one€or€more€future€distributions€to€the€beneficiary€who€receivedŠ „%` " Šthe€distribution€that€was€too€large€or€ordering€that€beneficiary€toŠ ©d Šreturn€some€or€all€of€the€distribution€to€the€trust;€andŠ r- Šą  ąą r ą(3)to€the€extent€that€the€court€is€unable,€after€applyingŠ ;ö ŠSubdivisions€(1)€and€(2),€to€place€the€beneficiaries,€the€trust,€or€both,Š æ Šin€the€positions€they€would€have€occupied€if€the€discretion€had€notŠ Ķˆ Šbeen€abused,€the€court€may€order€the€trustee€to€pay€an€appropriateŠ – Q Šamount€from€its€own€funds€to€one€or€more€of€the€beneficiaries€or€theŠ _  Štrust€or€both.Š ( ć Šą  ą(d)If€the€trustee€of€a€trust€reasonably€believes€that€one€or€moreŠ ń ¬  Šbeneficiaries€of€such€trust€will€object€to€the€manner€in€which€theŠ ŗ u  Štrustee€intends€to€exercise€or€not€exercise€a€discretionary€powerŠ ƒ >  Šconferred€by€Section€116.005€of€this€chapter,€the€trustee€may€petitionŠ L  Šthe€court€having€jurisdiction€over€a€trust,€and€the€court€shallŠ Š  Šdetermine€whether€the€proposed€exercise€or€Ō_ŌnonexerciseŌ_Ō€of€theŠ Ž™  Štrustee€of€such€discretionary€power€will€result€in€an€abuse€of€theŠ §b  Štrustee's€discretion.€€The€trustee€shall€state€in€such€petition€the€basisŠ p+  Šfor€its€belief€that€a€beneficiary€would€object.€€The€failure€or€refusal€ofŠ 9ō  Ša€beneficiary€to€sign€a€waiver€or€release€is€not€reasonable€grounds€forŠ ½  Ša€trustee€to€believe€the€beneficiary€will€object.€€The€court€mayŠ Ė† Šappoint€one€or€more€guardians€ad€litem€pursuant€to€Section€115.014Š ”O Šof€this€subtitle.€€If€the€petition€describes€the€proposed€exercise€orŠ ] ŠŌ_ŌnonexerciseŌ_Ō€of€the€power€and€contains€sufficient€information€toŠ &į Šinform€the€beneficiaries€of€the€reasons€for€the€proposal,€the€factsŠ ļŖ Šupon€which€the€trustee€fiduciary€relies,€and€an€explanation€of€howŠ øs Šthe€income€and€remainder€beneficiaries€will€be€affected€by€theŠ < Šproposed€exercise€or€Ō_ŌnonexerciseŌ_Ō€of€the€power,€a€beneficiary€whoŠ J Šchallenges€the€proposed€exercise€or€Ō_ŌnonexerciseŌ_Ō€has€the€burden€ofŠ Ī Šestablishing€that€it€will€result€in€an€abuse€of€discretion.€€The€trusteeŠ Ü— Šshall€advance€from€the€trust€principal€all€costs€incident€to€theŠ „` Šjudicial€determination,€including€the€reasonable€attorney's€fees€andŠ n) Šcosts€of€the€trustee,€any€beneficiary€or€beneficiaries€who€are€partiesŠ 7ņ Što€the€action€and€who€retain€counsel,€and€any€guardian€ad€litem.€€AtŠ »  Šthe€conclusion€of€the€proceeding,€the€court€may€award€costs€andŠ É„! Šreasonable€and€necessary€attorney's€fees€as€provided€in€SectionŠ ’M" Š114.064€of€this€subtitle,€including,€if€the€court€considers€isŠ [ # Šappropriate,€awarding€part€or€all€of€such€costs€against€the€trustŠ $!ß$ Šprincipal€or€income,€awarding€part€or€all€of€such€costs€against€one€orŠ ķ!Ø% Šmore€beneficiaries€or€such€beneficiary's€or€beneficiaries'€share€of€theŠ ¶"q& Štrust,€or€awarding€part€or€all€of€such€costs€against€the€trustee€in€theŠ #:' Štrustee's€individual€capacity€if€the€court€determines€the€trustee'sŠ H$( Šexercise€or€Ō_ŌnonexerciseŌ_Ō€of€discretionary€power€would€have€resultedŠ %Ģ) Šin€an€abuse€of€discretion€or€that€the€trustee€did€not€have€reasonableŠ ©d Šgrounds€for€believing€one€or€more€beneficiaries€will€object€to€theŠ r- Šproposed€exercise€or€Ō_ŌnonexerciseŌ_Ō€of€the€discretionary€power.€Š  ;ö „„Šą ö ąŠ … @ ŠŠ ©d ŠŠ '©d „„'ŠŠ … @ ŠŠ ©d ŠŠ (©d  €€(Šņ ņSECTION€116.007.PROVISIONS€REGARDINGŠ ˜S ŠŌ_ŌNONCHARITABLEŌ_Ō€Ō_ŌUNITRUSTSŌ_Ō.ó óŠ a  Šą  ą(a)This€section€does€not€apply€to€a€charitable€remainder€Ō_ŌunitrustŌ_ŌŠ * å Šas€defined€by€Section€664(d),€Internal€Revenue€Code€of€1986€(26Š ó ® ŠU.S.C.€Section€664),€as€amended.Š ¼ w Šą  ą(b)In€this€section:Š … @ Šą  ąą r ą(1)"Ō_ŌUnitrustŌ_Ō"€means€a€trust€the€terms€of€which€requireŠ N  Šdistribution€of€a€Ō_ŌunitrustŌ_Ō€amount.Š Ņ  Šą  ąą r ą(2)"Ō_ŌUnitrustŌ_Ō€amount"€means€a€distribution€mandated€by€theŠ ą›  Šterms€of€a€trust€in€an€amount€equal€to€a€fixed€percentage€of€not€lessŠ ©d  Šthan€three€or€more€than€five€percent€per€year€of€the€net€fair€marketŠ r-  Švalue€of€the€trusts's€assets,€valued€at€least€annually.€€The€Ō_ŌunitrustŌ_ŌŠ ;ö  Šamount€may€be€determined€by€reference€to€the€net€fair€market€valueŠ æ  Šof€the€trusts's€assets€in€one€year€or€more€than€one€year.Š Ķˆ  Šą  ą(c)Distribution€of€the€Ō_ŌunitrustŌ_Ō€amount€is€considered€aŠ –Q Šdistribution€of€all€of€the€income€of€the€Ō_ŌunitrustŌ_Ō€and€shall€not€beŠ _ Šconsidered€a€fundamental€departure€from€applicable€state€law.€€AŠ (ć Šdistribution€of€the€Ō_ŌunitrustŌ_Ō€amount€reasonably€apportions€the€totalŠ ń¬ Šreturn€of€a€Ō_ŌunitrustŌ_Ō.Š ŗu Šą  ą(d)Unless€the€terms€of€the€trust€specifically€provide€otherwise,Š ƒ> Ša€distribution€of€the€Ō_ŌunitrustŌ_Ō€amount€shall€be€treated€as€first€beingŠ L Šmade€from€the€following€sources€in€order€of€priority:Š Š Šą  ąą r ą(1)from€net€accounting€income€determined€as€if€the€trustŠ Ž™ Šwere€not€a€Ō_ŌunitrustŌ_Ō;Š §b Šą  ąą r ą(2)from€ordinary€accounting€income€not€allocable€to€netŠ p+ Šaccounting€income;Š 9ō Šą  ąą r ą(3)from€net€realized€short„term€capital€gains;Š ½ Šą  ąą r ą(4)from€net€realized€long„term€capital€gains;€andŠ Ė† Šą  ąą r ą(5)from€the€principal€of€the€trust€estate.Š  ”O „„ŠŠ '˜S „„'ŠŠ (˜S   €€(Šņ ņŌ_ŌSubchapterŌ_Ō€B.ą0 E ąDecedentššs€Estate€or€Terminating€IncomeŠ ń¬! ŠInterestó óŠ (ŗ u"E=E= „„(ŠŠ 'ń¬# „„'ŠŠ (ń¬$  €€(Šņ ņSECTION€116.051.DETERMINATION€AND€DISTRIBUTIONŠ "Ņ% ŠOF€NET€INCOME.ó óŠ ą"›& Šą  ąAfter€a€decedent€dies,€in€the€case€of€an€estate,€or€after€an€incomeŠ ©#d' Šinterest€in€a€trust€ends,€the€following€rules€apply:Š r$-( Šą  ąą r ą(1)A€fiduciary€of€an€estate€or€of€a€terminating€income€interestŠ ;%ö) Šshall€determine€the€amount€of€net€income€and€net€principal€receiptsŠ ©d Šreceived€from€property€specifically€given€to€a€beneficiary€under€theŠ r- Šrules€in€Ō_ŌSubchaptersŌ_Ō€C,€D,€and€E€which€apply€to€trustees€and€the€rulesŠ ;ö Šin€Subdivision€(5).The€fiduciary€shall€distribute€the€net€income€andŠ æ Šnet€principal€receipts€to€the€beneficiary€who€is€to€receive€the€specificŠ Ķˆ Šproperty.Š – Q Šą  ąą r ą(2)A€fiduciary€shall€determine€the€remaining€net€income€ofŠ _  Ša€decedentššs€estate€or€a€terminating€income€interest€under€the€rulesŠ ( ć Šin€Ō_ŌSubchaptersŌ_Ō€C,€D,€and€E€which€apply€to€trustees€and€by:Š ń ¬  Šą  ąą r ąą c ą(A)including€in€net€income€all€income€from€propertyŠ ŗ u  Šused€to€discharge€liabilities;Š ƒ >  Šą  ąą r ąą c ą(B)paying€from€income€or€principal,€in€the€fiduciaryššsŠ L  Šdiscretion,€fees€of€attorneys,€accountants,€and€fiduciaries;€court€costsŠ Š  Šand€other€expenses€of€administration;€and€interest€on€death€taxes,€butŠ Ž™  Šthe€fiduciary€may€pay€those€expenses€from€income€of€propertyŠ §b  Špassing€to€a€trust€for€which€the€fiduciary€claims€an€estate€tax€maritalŠ p+  Šor€charitable€deduction€only€to€the€extent€that€the€payment€of€thoseŠ 9ō  Šexpenses€from€income€will€not€cause€the€reduction€or€loss€of€theŠ ½  Šdeduction;€andŠ Ė† Šą  ąą r ąą c ą(C)paying€from€principal€all€other€disbursements€madeŠ ”O Šor€incurred€in€connection€with€the€settlement€of€a€decedentššs€estateŠ ] Šor€the€winding€up€of€a€terminating€income€interest,€including€debts,Š &į Šfuneral€expenses,€disposition€of€remains,€family€allowances,€andŠ ļŖ Šdeath€taxes€and€related€penalties€that€are€apportioned€to€the€estate€orŠ øs Šterminating€income€interest€by€the€will,€the€terms€of€the€trust,€orŠ < Šapplicable€law.Š J Šą  ąą r ą(3)A€fiduciary€shall€distribute€to€a€beneficiary€who€receivesŠ Ī Ša€pecuniary€amount€outright€the€interest€or€any€other€amountŠ Ü— Šprovided€by€the€will,€the€terms€of€the€trust,€or€applicable€law€from€netŠ „` Šincome€determined€under€Subdivision€(2)€or€from€principal€to€theŠ n) Šextent€that€net€income€is€insufficient.€€If€a€beneficiary€is€to€receive€aŠ 7ņ Špecuniary€amount€outright€from€a€trust€after€an€income€interest€endsŠ »  Šand€no€interest€or€other€amount€is€provided€for€by€the€terms€of€theŠ É„! Štrust€or€applicable€law,€the€fiduciary€shall€distribute€the€interest€orŠ ’M" Šother€amount€to€which€the€beneficiary€would€be€entitled€underŠ [ # Šapplicable€law€if€the€pecuniary€amount€were€required€to€be€paidŠ $!ß$ Šunder€a€will.€€Unless€otherwise€provided€by€the€will€or€the€terms€ofŠ ķ!Ø% Šthe€trust,€a€beneficiary€who€receives€a€pecuniary€amount,€regardlessŠ ¶"q& Šof€whether€in€trust,€shall€be€paid€interest€on€the€pecuniary€amount€atŠ #:' Šthe€legal€rate€of€interest€as€provided€by€Section€302.002,€FinanceŠ H$( ŠCode.€€Interest€on€the€pecuniary€amount€is€payable:Š %Ģ) ŠŌ_Ōą  ąą r ąą c ą(A)under€a€will,€beginning€on€the€first€anniversary€of€theŠ ©d Šdate€of€the€decedent's€death;€orŠ r- Šą  ąą r ąą c ą(B)under€a€trust,€beginning€on€the€first€anniversary€of€theŠ ;ö Šdate€on€which€an€income€interest€ends.Š æ Šą  ąą r ą(4)A€fiduciary€shall€distribute€the€net€income€remaining€afterŠ Ķˆ Šdistributions€required€by€Subdivision€(3)€in€the€manner€described€inŠ – Q ŠSection€116.052€to€all€other€beneficiaries,€even€if€the€beneficiaryŠ _  Šholds€an€unqualified€power€to€withdraw€assets€from€the€trust€or€otherŠ ( ć Špresently€exercisable€general€power€of€appointment€over€the€trust.Š ń ¬  Šą  ąą r ą(5)A€fiduciary€may€not€reduce€principal€or€income€receiptsŠ ŗ u  Šfrom€property€described€in€Subdivision€(1)€because€of€a€paymentŠ ƒ >  Šdescribed€in€Section€116.201€or€116.202€to€the€extent€that€the€will,Š L  Šthe€terms€of€the€trust,€or€applicable€law€requires€the€fiduciary€to€makeŠ Š  Šthe€payment€from€assets€other€than€the€property€or€to€the€extent€thatŠ Ž™  Šthe€fiduciary€recovers€or€expects€to€recover€the€payment€from€a€thirdŠ §b  Šparty.The€net€income€and€principal€receipts€from€the€property€areŠ p+  Šdetermined€by€including€all€of€the€amounts€the€fiduciary€receives€orŠ 9ō  Špays€with€respect€to€the€property,€whether€those€amounts€accrued€orŠ ½  Šbecame€due€before,€on,€or€after€the€date€of€a€decedentššs€death€or€anŠ Ė† Šincome€interestššs€terminating€event,€and€by€making€a€reasonableŠ ”O Šprovision€for€amounts€that€the€fiduciary€believes€the€estate€orŠ ] Šterminating€income€interest€may€become€obligated€to€pay€after€theŠ &į Šproperty€is€distributed.Š ļŖ Šą  ąą r ą(6)A€fiduciary,€without€reduction€for€taxes,€shall€pay€to€aŠ øs Šcharitable€organization€that€is€entitled€to€receive€income€underŠ < ŠSubdivision€(4)€any€amount€allowed€as€a€tax€deduction€to€the€estateŠ J Šor€trust€for€income€payable€to€the€charitable€organization.Š  Ī „„ŠSubchapter€B€of€the€Uniform€Act€applies€toŠ "Ņ Šdecedentššs€estates€and€to€terminating€incomeŠ ą"› Šinterests€in€trusts€(revocable€trusts).€€SectionŠ ©#d Š378B€of€the€Texas€Probate€code€applies€only€toŠ r$- Šdecedentššs€estates.€€There€is€no€correspondingŠ ;%ö  Šstatute€concerning€terminating€income€interestsŠ ©d Šin€trusts.Š r- ŠCompare€Section€116.051(2)€of€the€Uniform€ActŠ ;ö Šwith€šš€378B(a)€of€the€Texas€Probate€Code.€Š æ ŠUnder€the€Texas€Probate€Code,€interest€on€estateŠ Ķˆ Štax€must€be€charged€against€principal.€€InŠ – Q Šcontrast,€the€Uniform€Act€gives€the€trustee€orŠ _  Špersonal€representative€discretion€to€allocateŠ ( ć Šinterest€on€estate€tax€to€either€principal€orŠ ń ¬  Šincome.Š ŗ u  ŠŠ ƒ >  ŠŠ '©d „„'Šņ ņTexas€Probate€Code€šš€378B.€€Allocation€of€Income€andŠ "Ņ ŠExpenses€During€Administration€of€Decedent's€Estate.ó óŠ ą"› Šą %" ą(a)Except€as€provided€by€Subsection€(b)€of€this€section€andŠ ©#d Šunless€the€will€provides€otherwise,€all€expenses€incurred€inŠ r$- Šconnection€with€the€settlement€of€a€decedent's€estate,€includingŠ ;%ö Šdebts,€funeral€expenses,€estate€taxes,€interest€and€penaltiesŠ ©d Šrelating€to€estate€taxes,€and€family€allowances,€shall€be€chargedŠ r- Šagainst€the€principal€of€the€estate.€€Fees€and€expenses€of€anŠ ;ö Šattorney,€accountant,€or€other€professional€advisor,€commissionsŠ æ Šand€expenses€of€a€personal€representative,€court€costs,€and€allŠ Ķˆ Šother€similar€fees€or€expenses€relating€to€the€administration€of€theŠ – Q Šestate€shall€be€allocated€between€the€income€and€principal€of€theŠ _  Šestate€as€the€executor€determines€in€its€discretion€to€be€just€andŠ ( ć Šequitable.Š ń ¬  Šą %" ą(b)Unless€the€will€provides€otherwise,€income€from€the€assetsŠ ŗ u  Šof€a€decedent's€estate€that€accrues€after€the€death€of€the€testatorŠ ƒ >  Šand€before€distribution,€including€income€from€property€used€toŠ L  Šdischarge€liabilities,€shall€be€determined€according€to€the€rulesŠ Š  Šapplicable€to€a€trustee€under€the€Texas€Trust€Code€(Subtitle€B,Š Ž™  ŠTitle€9,€Property€Code)× ƒ# ׯ ƒ%$ÓŻņņŚ  Ś1Ś  ŚóóŻ  Ż×  ׀and€distributed€as€provided€byŠ §b  ŠSubsections€(c),€(d),€and€(e)€of€this€section.Š p+  Šą %" ą(c)The€income€from€the€property€bequeathed€or€devised€to€aŠ 9ō  Šspecific€devisee€shall€be€distributed€to€the€devisee€after€reductionŠ ½  Šfor€property€taxes,€ordinary€repairs,€insurance€premiums,€interestŠ Ė† Šaccrued€after€the€death€of€the€testator,€other€expenses€ofŠ ”O Šmanagement€and€operation€of€the€property,€and€other€taxes,Š ] Šincluding€the€taxes€imposed€on€the€income€that€accrues€duringŠ &į Šthe€period€of€administration€and€that€is€payable€to€the€devisee.Š ļŖ Šą %" ą(d)Except€as€provided€by€Subsection€(f)€of€this€section,€theŠ øs Šbalance€of€the€net€income€shall€be€distributed€to€all€otherŠ < Šdevisees€after€reduction€for€the€balance€of€property€taxes,Š J Šordinary€repairs,€insurance€premiums,€interest€accrued,€includingŠ Ī Šinterest€accruing€as€provided€by€Subsection€(f)€of€this€sectionŠ Ü— Šafter€the€death€of€the€testator,€other€expenses€of€management€andŠ „` Šoperation€of€all€property€from€which€the€estate€is€entitled€toŠ n) Šincome,€and€taxes€imposed€on€income€that€accrues€during€theŠ 7ņ Šperiod€of€administration€and€that€is€payable€or€allocable€to€theŠ »  Šdevisees,€in€proportion€to€the€devisees'€respective€interests€in€theŠ É„! Šundistributed€assets€of€the€estate.Š ’M" Šą %" ą(e)If€a€charitable€organization€is€entitled€to€receive€incomeŠ [ # Šunder€Subsection€(b)€of€this€section,€any€amount€allowed€as€a€taxŠ $!ß$ Šdeduction€to€the€estate€for€income€payable€to€the€charitableŠ ķ!Ø% Šorganization€shall€be€paid,€without€reduction€for€taxes,€to€theŠ ¶"q& Šcharitable€organization.Š #:' Šą %" ą(f)A€devisee€of€a€pecuniary€bequest,€whether€or€not€in€trust,Š H$( Šshall€be€paid€interest€on€the€bequest€at€the€legal€rate€of€interest€asŠ %Ģ) Šprovided€by€Article€1.03,€Revised€Statutes€(Article€5069„1.03,Š ©d ŠVernon's€Texas€Civil€Statutes),€and€its€subsequent€amendments,Š r- Šbeginning€one€year€after€the€date€the€court€grants€lettersŠ ;ö Štestamentary€or€letters€of€administration.Š æ Šą %" ą(g)Income€received€by€a€trustee€under€this€section€shall€beŠ Ķˆ Štreated€as€income€of€the€trust€as€provided€by€Section€113.103,Š – Q ŠProperty€Code.Š _  Šą %" ą(h)In€this€section,€"undistributed€assets"€includes€funds€usedŠ ( ć Što€pay€debts,€administration€expenses,€and€federal€and€stateŠ ń ¬  Šestate,€inheritance,€succession,€and€generation„skipping€transferŠ ŗ u  Štaxes€until€the€date€of€payment€of€the€debts,€expenses,€and€taxes.€Š ƒ >  ŠExcept€as€required€by€Sections€2055€and€2056€of€the€InternalŠ L  ŠRevenue€Code€of€1986€(26€U.S.C.€Secs.€2055€and€2056),€and€itsŠ Š  Šsubsequent€amendments,€the€frequency€and€method€ofŠ Ž™  Šdetermining€the€beneficiaries'€respective€interests€in€theŠ §b  Šundistributed€assets€of€the€estate€shall€be€in€the€executor's€soleŠ p+  Šand€absolute€discretion.€€The€executor€may€consider€all€relevantŠ 9ō  Šfactors,€including€administrative€convenience€and€expense€andŠ ½  Šthe€interests€of€the€various€beneficiaries€of€the€estate€in€order€toŠ Ė† Šreach€a€fair€and€equitable€result€among€beneficiaries.Š (”O  €€(Šņ ņSECTION€116.052.DISTRIBUTION€TO€RESIDUARY€ANDŠ p+ ŠREMAINDER€BENEFICIARIES.ó óŠ 9ō Šą  ą(a)Each€beneficiary€described€in€Section€116.051€entitled€toŠ ½ Šreceive€a€portion€of€the€net€income€equal€to€the€beneficiaryššsŠ Ė† Šfractional€interest€in€undistributed€principal€assets,€using€values€asŠ ”O Šof€the€distribution€date.If€a€fiduciary€makes€more€than€oneŠ ] Šdistribution€of€assets€to€beneficiaries€to€whom€this€section€applies,Š & į Šeach€beneficiary,€including€one€who€does€not€receive€part€of€theŠ ļ Ŗ Šdistribution,€is€entitled,€as€of€each€distribution€date,€to€the€netŠ ø!s Šincome€the€fiduciary€has€received€after€the€date€of€death€orŠ "< Šterminating€event€or€earlier€distribution€date€but€has€not€distributedŠ J# Šas€of€the€current€distribution€date.Š $Ī  Šą  ą(b)In€determining€a€beneficiaryššs€share€of€net€income,€theŠ Ü$—! Šfollowing€rules€apply:Š „%` " Šą  ąą r ą(1)The€beneficiary€is€entitled€to€receive€a€portion€of€the€netŠ ©d Šincome€equal€to€the€beneficiaryššs€fractional€interest€in€theŠ r- Šundistributed€principal€assets€immediately€before€the€distributionŠ ;ö Šdate,€including€assets€that€later€may€be€sold€to€meet€principalŠ æ Šobligations.Š Ķˆ Šą  ąą r ą(2)The€beneficiaryššs€fractional€interest€in€the€undistributedŠ – Q Šprincipal€assets€must€be€calculated€without€regard€to€propertyŠ _  Šspecifically€given€to€a€beneficiary€and€property€required€to€payŠ ( ć Špecuniary€amounts.Š ń ¬  Šą  ąą r ą(3)The€beneficiaryššs€fractional€interest€in€the€undistributedŠ ŗ u  Šprincipal€assets€must€be€calculated€on€the€basis€of€the€aggregateŠ ƒ >  Švalue€of€those€assets€as€of€the€distribution€date€without€reducing€theŠ L  Švalue€by€any€unpaid€principal€obligation.Š Š  Šą  ąą r ą(4)The€distribution€date€for€purposes€of€this€section€may€beŠ Ž™  Šthe€date€as€of€which€the€fiduciary€calculates€the€value€of€the€assets€ifŠ §b  Šthat€date€is€reasonably€near€the€date€on€which€assets€are€actuallyŠ p+  Šdistributed.Š 9ō  Šą  ą(c)If€a€fiduciary€does€not€distribute€all€of€the€collected€butŠ ½  Šundistributed€net€income€to€each€person€as€of€a€distribution€date,€theŠ Ė† Šfiduciary€shall€maintain€appropriate€records€showing€the€interest€ofŠ ”O Šeach€beneficiary€in€that€net€income.Š ] ŠŌ& ķ Ōą  ą(d)A€fiduciary€may€apply€the€rules€in€this€section,€to€the€extentŠ &į Šthat€the€fiduciary€considers€it€appropriate,€to€net€gain€or€loss€realizedŠ ļŖ Šafter€the€date€of€death€or€terminating€event€or€earlier€distribution€dateŠ øs Šfrom€the€disposition€of€a€principal€asset€if€this€section€applies€to€theŠ < Šincome€from€the€asset.Ō'ķ&š®ŌŠ  J „„ŠSection€116.052€of€the€Uniform€Act€and€ššŠ p+ Š378B(d)€and€(h)€of€the€Texas€Probate€codeŠ 9ō Šaddress€the€allocation€of€net€income€toŠ ½ Šbeneficiaries€who€are€not€receiving€specificŠ Ė† Šproperty€or€a€pecuniary€amount.€€The€UniformŠ ”O ŠAct€diverges€from€the€Texas€Probate€Code€inŠ ]  Štwo€important€aspects.€First,€the€allocation€toŠ & į! Šthe€residuary€beneficiaries€is€based€on€valuesŠ ļ Ŗ" Šwhen€the€distribution€is€made,€rather€thanŠ ø!s# Šinventory€value.€€Second,€a€fiduciary€may€applyŠ "<$ Šthese€allocation€rules€to€net€gains€and€losses,€asŠ J#% Šwell€as€to€ordinary€income.ą  ąŠ $Ī& ŠŠ '©d „„'ŠŠ p+ ŠŠ (©d  €€(Šņ ņSubchapter€C.ą0 E ąApportionment€at€Beginning€and€End€of€IncomeŠ §b ŠInterestó óŠ (p+E=E= „„(ŠŠ '§b „„'ŠŠ (§b  €€(Šņ ņSECTION€116.101.WHEN€RIGHT€TO€INCOME€BEGINS€ANDŠ Ķˆ ŠENDS.ó óŠ –Q Šą  ą(a)An€income€beneficiary€is€entitled€to€net€income€from€the€dateŠ _ Šon€which€the€income€interest€begins.An€income€interest€begins€onŠ (ć  Šthe€date€specified€in€the€terms€of€the€trust€or,€if€no€date€is€specified,Š ń¬  Šon€the€date€an€asset€becomes€subject€to€a€trust€or€successive€incomeŠ ŗ u  Šinterest.Š ƒ!>  Šą  ą(b)An€asset€becomes€subject€to€a€trust:Š L"  Šą  ąą r ą(1)on€the€date€it€is€transferred€to€the€trust€in€the€case€of€anŠ #Š Šasset€that€is€transferred€to€a€trust€during€the€transferorššs€life;Š Ž#™ Šą  ąą r ą(2)on€the€date€of€a€testatorššs€death€in€the€case€of€an€asset€thatŠ §$b Šbecomes€subject€to€a€trust€by€reason€of€a€will,€even€if€there€is€anŠ p%+  Šintervening€period€of€administration€of€the€testatorššs€estate;€orŠ ©d Šą  ąą r ą(3)on€the€date€of€an€individualššs€death€in€the€case€of€an€assetŠ r- Šthat€is€transferred€to€a€fiduciary€by€a€third€party€because€of€theŠ ;ö Šindividualššs€death.Š æ Šą  ą(c)An€asset€becomes€subject€to€a€successive€income€interest€onŠ Ķˆ Šthe€day€after€the€preceding€income€interest€ends,€as€determined€underŠ – Q ŠSubsection€(d),€even€if€there€is€an€intervening€period€ofŠ _  Šadministration€to€wind€up€the€preceding€income€interest.Š ( ć Šą  ą(d)An€income€interest€ends€on€the€day€before€an€incomeŠ ń ¬  Šbeneficiary€dies€or€another€terminating€event€occurs,€or€on€the€lastŠ ŗ u  Šday€of€a€period€during€which€there€is€no€beneficiary€to€whom€aŠ ƒ >  Štrustee€may€distribute€income.Š  L  „„ŠThere€appears€to€be€no€significant€differenceŠ Ķˆ  Šhere€between€the€Uniform€Act€and€the€TexasŠ –Q ŠTrust€Code.Š _ ŠŠ '©d „„'Šņ ņšš€113.103€€When€Right€to€Income€Arises;€Apportionment€ofŠ Ķˆ ŠIncomeó óŠ –Q Šą %" ą(a)An€income€beneficiary's€right€to€income€is€determinedŠ _ Šfrom€the€date€specified€in€the€terms€of€a€trust€or,€if€none€isŠ (ć Šspecified,€the€date€an€asset€becomes€subject€to€the€trust.€€If€anŠ ń¬ Šasset€becomes€subject€to€a€trust€under€a€will,€it€becomes€subjectŠ ŗ u Što€the€trust€as€of€the€date€of€the€death€of€the€testator,€even€thoughŠ ƒ!> Šthere€is€an€intervening€period€of€administration€of€the€testator'sŠ L"  Šestate.€€If€an€asset€becomes€subject€to€a€trust€because€of€theŠ #Š  Štermination€of€or€a€distribution€from€another€trust,€it€becomesŠ Ž#™  Šsubject€to€the€trust€as€of€the€date€of€the€event€causing€theŠ §$b  Štermination€or€the€date€of€distribution,€whichever€occurs€first.Š p%+  ŠŠ (©d  €€(Šņ ņSECTION€116.102.APPORTIONMENT€OF€RECEIPTS€ANDŠ ©d  ŠDISBURSEMENTS€WHEN€DECEDENT€DIES€OR€INCOMEŠ r-  ŠINTEREST€BEGINS.ó óŠ ;ö  Šą  ą(a)A€trustee€shall€allocate€an€income€receipt€or€disbursementŠ æ  Šother€than€one€to€which€Section€116.051€(1)€applies€to€principal€if€itsŠ Ķˆ  Šdue€date€occurs€before€a€decedent€dies€in€the€case€of€an€estate€orŠ –Q Šbefore€an€income€interest€begins€in€the€case€of€a€trust€or€successiveŠ _ Šincome€interest.Š (ć  Šą  ą(b)A€trustee€shall€allocate€an€income€receipt€or€disbursement€toŠ ń¬  Šincomeif€its€due€date€occurs€on€or€after€the€date€on€which€aŠ ŗu  Šdecedent€dies€or€an€income€interest€begins€and€it€is€a€periodic€dueŠ ƒ>  Šdate.An€income€receipt€or€disbursement€must€be€treated€as€accruingŠ L  Šfrom€day€to€day€if€its€due€date€is€not€periodic€or€it€has€no€dueŠ Š Šdate.The€portion€of€the€receipt€or€disbursement€accruing€before€theŠ Ž™ Šdate€on€which€a€decedent€dies€or€an€income€interest€begins€must€beŠ §b Šallocated€to€principal€and€the€balance€must€be€allocated€to€income.Š p+ Šą  ą(c)An€item€of€income€or€an€obligation€is€due€on€the€date€theŠ 9ō Špayer€is€required€to€make€a€payment.If€a€payment€date€is€not€stated,Š ½ Šthere€is€no€due€date€for€the€purposes€of€this€chapter.Distributions€toŠ Ė† Šshareholders€or€other€owners€from€an€entity€to€which€SectionŠ ”O Š116.151€applies€are€deemed€to€be€due€on€the€date€fixed€by€the€entityŠ ] Šfor€determining€who€is€entitled€to€receive€the€distribution€or,€if€noŠ & į Šdate€is€fixed,€on€the€declaration€date€for€the€distribution.A€due€dateŠ ļ Ŗ Šis€periodic€for€receipts€or€disbursements€that€must€be€paid€at€regularŠ ø!s Šintervals€under€a€lease€or€an€obligation€to€pay€interest€or€if€an€entityŠ "< Šcustomarily€makes€distributions€at€regular€intervals.Š  J# „„ŠUnder€the€Texas€Trust€Code,€receipts€from€non„Š ©d  Šperiodic€payments€are€apportioned€based€onŠ r-  Šwhen€they€are€due.€€If€it€is€due€but€not€paid€on€orŠ ;ö  Šbefore€the€decedentššs€death€or€termination€orŠ æ  Šdistribution€from€the€other€trust,€€then€theŠ Ķˆ  Šreceipt€is€principal.€€If€it€is€due€after€such€time,Š –Q! Šthen€the€receipt€is€income.€€In€contrast,€theŠ _" ŠUniform€Act€apportions€receipts€from€non„Š (ć# Šperiodic€on€a€per€day€basis.Š ń¬$ ŠThe€rules€are€opposite€for€receipts€from€periodicŠ ŗu% Špayments.€€Under€the€Texas€Trust€Code,€suchŠ ƒ>& Šreceipts€are€apportioned€on€a€per€day€basis.€€InŠ L' Šcontrast,€the€Uniform€Act€provides€that€if€aŠ Š( Šperiodic€payment€is€due€on€or€after€theŠ Ž™) Šdecedentššs€death€or€termination€or€distributionŠ §b* Šfrom€the€other€trust,€then€the€receipt€is€income.Š 'p++ „„'Šņ ņšš€113.103€€When€Right€to€Income€Arises;€Apportionment€ofŠ ©d , ŠIncomeó óŠ r- - Š...Š ;ö . Šą %" ą(b)Any€receipt€from€an€income„producing€asset€is€incomeŠ æ / Ševen€though€the€receipt€was€earned€or€accrued€in€whole€or€in€partŠ Ķˆ 0 Šbefore€the€date€the€asset€became€subject€to€the€trust,€except€if€anŠ –Q1 Šasset€becomes€subject€to€a€trust€under€a€will€or€because€of€theŠ _2 Štermination€of€or€distribution€from€another€trust:Š (ć3 Šą %" ąą # ą(1)receipts€due€but€not€paid€on€the€date€of€the€death€ofŠ ń¬4 Šthe€testator€or€on€the€date€of€the€event€causing€the€termination€ofŠ ŗu5 Šor€distribution€from€the€other€trust,€as€the€case€may€be,€areŠ ƒ>6 Šprincipal;€andŠ L7 Šą %" ąą # ą(2)receipts€in€the€form€of€periodic€payments,€other€thanŠ Š8 Šcorporate€distributions€to€stockholders,€including€rent,€interest,Š Ž™9 Šor€annuities,€that€are€not€due€on€the€date€of€death€of€the€testatorŠ §b: Šor€on€the€date€of€the€event€causing€the€termination€of€orŠ p+; Šdistribution€from€the€other€trust€shall€be€treated€as€accruing€fromŠ 9ō< Šday€to€day,€and€the€portion€of€the€receipt€accruing€before€theŠ ½= Šapplicable€date€is€principal,€and€the€balance€is€income.Š Ė†> Š...Š ”O? Šą %" ą(d)Corporate€distributions€to€stockholders€are€to€be€treatedŠ ]@ Šas€due€on€the€day€fixed€by€the€corporation€for€determination€ofŠ & įA Šstockholders€of€record€entitled€to€distribution€or,€if€no€date€isŠ ļ ŖB Šfixed,€on€the€date€of€declaration€of€the€distribution€by€theŠ ø!sC Šcorporation.Š ("<D  €€(Šņ ņSECTION€116.103.APPORTIONMENT€WHEN€INCOMEŠ §$bE ŠINTEREST€ENDS.ó óŠ p%+ F Šą  ą(a)In€this€section,€š šundistributed€incomešš€means€net€incomeŠ ©d Šreceived€before€the€date€on€which€an€income€interest€ends.The€termŠ r- Šdoes€not€include€an€item€of€income€or€expense€that€is€due€or€accruedŠ ;ö Šor€net€income€that€has€been€added€or€is€required€to€be€added€toŠ æ Šprincipal€under€the€terms€of€the€trust.Š Ķˆ Šą  ą(b)When€a€mandatory€income€interest€ends,€the€trustee€shall€payŠ – Q Što€a€€mandatory€income€beneficiary€who€survives€that€date,€or€theŠ _  Šestate€of€a€deceased€mandatory€income€beneficiary€whose€deathŠ ( ć Šcauses€the€interest€to€end,€the€beneficiaryššs€share€of€the€undistributedŠ ń ¬  Šincome€that€is€not€disposed€of€under€the€terms€of€the€trust€unless€theŠ ŗ u  Šbeneficiary€has€an€unqualified€power€to€revoke€more€than€fiveŠ ƒ >  Špercent€of€the€trust€immediately€before€the€income€interest€ends.InŠ L  Šthe€latter€case,€the€undistributed€income€from€the€portion€of€the€trustŠ Š  Šthat€may€be€revoked€must€be€added€to€principal.Š Ž™  Šą  ą(c)When€a€trusteeššs€obligation€to€pay€a€fixed€annuity€or€a€fixedŠ §b  Šfraction€of€the€value€of€the€trustššs€assets€ends,€the€trustee€shall€prorateŠ p+  Šthe€final€payment€if€and€to€the€extent€required€by€applicable€law€toŠ 9ō  Šaccomplish€a€purpose€of€the€trust€or€its€settlor€relating€to€income,Š ½  Šgift,€estate,€or€other€tax€requirements.Š  Ė† „„ŠWhen€an€income€interest€ends,€the€Texas€TrustŠ §$b ŠCode€provides€(1)€that€the€income€beneficiary€isŠ p%+  Šentitled€to€all€income€that€has€been€received€butŠ ©d Šnot€distributed€and€all€income€that€has€accruedŠ r- Šand€(2)€that€receipts€from€periodic€payments€areŠ ;ö Šapportioned€on€a€per€day€basis.Š æ ŠUnder€the€Uniform€Act,€a€mandatory€incomeŠ Ķˆ Šbeneficiary€is€entitled€to€undistributed€incomeŠ – Q Šif€such€beneficiary€did€not€have€the€power€toŠ _  Šrevoke€more€than€five€percent€of€the€trust.€€IfŠ ( ć Šsuch€beneficiary€possessed€a€power€to€revokeŠ ń ¬  Šmore€than€five€percent€of€the€trust,€undistributedŠ ŗ u  Šincome€must€be€added€to€principal.€However,Š ƒ >  Šthe€Uniform€Act€defines€š šundistributed€incomeššŠ L  Šas€only€net€income€that€has€been€received€butŠ Š  Šnot€distributed€(it€excludes€accrued€income€andŠ Ž™  Šexpenses).Š '§b  „„'Šņ ņšš€113.103€€When€Right€to€Income€Arises;€Apportionment€ofŠ §$b ŠIncomeó óŠ p%+  Š...Š ©d Šą %" ą(c)An€income€beneficiary€whose€interest€is€terminated€or€hisŠ r- Šestate€is€entitled€to:Š ;ö Šą %" ąą # ą(1)income€distributable€but€not€distributed€on€the€date€ofŠ æ Štermination;Š Ķˆ Šą %" ąą # ą(2)distributable€income€due€but€not€paid€to€the€trustee€onŠ – Q Šthe€date€of€termination;€andŠ _  Šą %" ąą # ą(3)income€in€the€form€of€periodic€payments,€other€thanŠ ( ć Šcorporate€distributions€to€stockholders,€including€rent,€interests,Š ń ¬  Šand€annuities,€not€due€on€the€date€of€termination,€as€accrued€fromŠ ŗ u  Šday€to€day.Š (ƒ >   €€(Šņ ņSubchapter€D.€€ą0 E ąAllocation€of€Receipts€During€Administration€ofŠ (ć  ŠTrustó óŠ (ń¬ E=E= „„(ŠŠ '(ć „„'ŠŠ ((ć  €€(Šņ ņPart€1.€€Receipts€from€Entitiesó óŠ  N  „„ŠŠ 'N  „„'ŠŠ (N   €€(Šņ ņSECTION€116.151.CHARACTER€OF€RECEIPTS.ó óŠ «f Šą  ą(a)In€this€section,€š šentityšš€means€a€corporation,€partnership,Š t/ Šlimited€liability€company,€regulated€investment€company,€real€estateŠ =ų Šinvestment€trust,€common€trust€fund,€or€any€other€organization€inŠ Į Šwhich€a€trustee€has€an€interest€other€than€a€trust€or€estate€to€whichŠ ĻŠ ŠSection€116.152€applies,€a€business€or€activity€to€which€SectionŠ ˜S Š116.153€applies,€or€an€asset„backed€security€to€which€SectionŠ a Š116.178€applies.Š *å Šą  ą(b)Except€as€otherwise€provided€in€this€section,€a€trustee€shallŠ ó® Šallocate€to€income€money€received€from€an€entity.Š ¼w Šą  ą(c)A€trustee€shall€allocate€the€following€receipts€from€an€entityŠ … @ Što€principal:Š N!  Šą  ąą r ą(1)property€other€than€money;Š "Ņ Šą  ąą r ą(2)money€received€in€one€distribution€or€a€series€of€relatedŠ ą"›  Šdistributions€in€exchange€for€part€or€all€of€a€trustššs€interest€in€theŠ ©#d! Šentity;Š r$-" Šą  ąą r ą(3)money€received€in€total€or€partial€liquidation€of€Ō_ŌtheŠ ;%ö# Šentity;€andŠ ©d Šą  ąą r ą(4)money€received€from€an€entity€that€is€a€regulatedŠ r- Šinvestment€company€or€a€real€estate€investment€trust€if€the€moneyŠ ;ö Šdistributed€is€a€capital€gain€dividend€for€federal€income€tax€purposes.Š æ Šą  ą(d)Money€is€received€in€partial€liquidation:Š Ķˆ Šą  ąą r ą(1)to€the€extent€that€the€entity,€at€or€near€the€time€of€aŠ – Q Šdistribution,€indicates€that€it€is€a€distribution€in€partial€liquidation;Š _  ŠorŠ ( ć Šą  ąą r ą(2)if€the€total€amount€of€money€and€property€received€in€aŠ ń ¬  Šdistribution€or€series€of€related€distributions€is€greater€than€20Š ŗ u  Špercent€of€the€entityššs€gross€assets,€as€shown€by€the€entityššs€year„endŠ ƒ >  Šfinancial€statements€immediately€preceding€the€initial€receipt.Š L  Šą  ą(e)Money€is€not€received€in€partial€liquidation,€nor€may€it€beŠ Š  Štaken€into€account€under€Subsection€(d)€(2),€to€the€extent€that€it€doesŠ Ž™  Šnot€exceed€the€amount€of€income€tax€that€a€trustee€or€beneficiaryŠ §b  Šmust€pay€on€taxable€income€of€the€entity€that€distributes€the€money.Š p+  Šą  ą(f)A€trustee€may€rely€upon€a€statement€made€by€an€entity€aboutŠ 9ō  Šthe€source€or€character€of€a€distribution€if€the€statement€is€made€at€orŠ ½  Šnear€the€time€of€distribution€by€the€entityššs€board€of€directors€orŠ Ė† Šother€person€or€group€of€persons€authorized€to€exercise€powers€to€payŠ ”O Šmoney€or€transfer€property€comparable€to€those€of€a€corporationššsŠ ] Šboard€of€directors.Š  &į „„ŠSection€116.151€of€the€Uniform€Act€applies€toŠ «f Šall€business€entities,€except€those€covered€byŠ t/ ŠSections€116.152,€116.153,€and€116.178.€€InŠ =ų Šcontrast,€šš€113.104€of€the€Texas€Trust€CodeŠ Į Šapplies€to€corporations€only,€and€šš€113.106€ofŠ ĻŠ Šthe€Texas€Trust€Code€applies€to€soleŠ ˜S Šproprietorships,€partnerships,€and€farmingŠ a Šoperations€only.Š *å ŠThe€Uniform€Act€is€more€comprehensive.Š ó® ŠŠ '©d „„'Šņ ņšš€113.104€€Corporate€Distributionsó óŠ «f Šą %" ą(a)Except€as€provided€by€Subsections€(b)€and€(c)€of€thisŠ t/ Šsection,€all€corporate€distributions€are€income,€including:Š =ų Šą %" ąą # ą(1)cash€dividends;Š Į Šą %" ąą # ą(2)distributions€of€or€rights€to€subscribe€to€shares,Š ĻŠ Šsecurities,€or€obligations€of€a€corporation€other€than€theŠ ˜S Šdistributing€corporation;Š a Šą %" ąą # ą(3)the€proceeds€from€the€disposition€of€a€right€or€propertyŠ *å  Šthat€is€income€under€this€subsection;€andŠ ó®  Šą %" ąą # ą(4)the€distribution€chosen€under€an€option€given€by€theŠ ¼w  Šdistributing€corporation€to€receive€the€distribution€either€in€cashŠ … @  Šor€in€its€own€shares.Š N!   Šą %" ą(b)Except€for€the€portion€of€a€corporate€distribution€that€theŠ "Ņ Šcorporation€indicates€is€a€settlement€of€preferred€or€guaranteedŠ ą"› Šdividends€accrued€since€the€trustee€became€a€shareholder€or€is€inŠ ©#d Šlieu€of€an€ordinary€cash€dividend,€a€corporate€distribution€isŠ r$- Šprincipal€if€the€distribution€is€pursuant€to:Š ;%ö Šą %" ąą # ą(1)a€call€of€shares;Š ©d Šą %" ąą # ą(2)a€merger,€consolidation,€reorganization,€or€other€planŠ r- Šby€which€assets€of€the€distributing€corporation€are€acquired€byŠ ;ö Šanother€corporation;€orŠ æ Šą %" ąą # ą(3)a€total€or€partial€liquidation€of€the€corporation,Š Ķˆ Šincluding€a€distribution€that€the€corporation€indicates€is€aŠ – Q Šdistribution€in€total€or€partial€liquidation€or€a€distribution€ofŠ _  Šassets,€other€than€cash,€under€a€court€decree€or€a€finalŠ ( ć Šadministrative€order€of€a€governmental€agency.Š ń ¬  Šą %" ą(c)Property€is€principal€if€it€is:Š ŗ u  Šą %" ąą # ą(1)a€distribution€of€shares€of€the€distributing€corporation,Š ƒ >  Šincluding€a€distribution€in€the€form€of€a€stock€split€or€stockŠ L  Šdividend;Š Š  Šą %" ąą # ą(2)a€right€of€stockholders€because€of€their€stockŠ Ž™  Šownership€to€subscribe€to€shares€or€other€securities€issued€by€theŠ §b  Šdistributing€corporation€or€the€proceeds€of€a€sale€of€the€right;€orŠ p+  Šą %" ąą # ą(3)any€distribution€except€from€ordinary€income€by€aŠ 9ō  Šregulated€investment€company€or€by€a€trust€qualifying€andŠ ½  Šelecting€to€be€taxed€under€federal€law€as€a€real€estate€investmentŠ Ė† Štrust,€including€a€distribution€from€capital€gains,€depreciation,€orŠ ”O Šdepletion,€regardless€of€whether€the€distribution€is€cash,€anŠ ] Šoption€to€take€new€stock€or€cash,€or€an€option€to€purchaseŠ &į Šadditional€shares.Š ļŖ Šą %" ą(d)For€the€purpose€of€determining€the€source€or€character€ofŠ øs Šdividends€or€a€distribution€of€corporate€assets€under€this€section,Š < Šthe€trustee€may€rely€on€a€statement€of€the€distributing€corporationŠ J Šas€to€any€relevant€fact.Š Ī ŠĢņ ņšš€113.106€€Business€and€Farming€Operationsó óŠ „` Š(a)If€a€trustee€uses€part€of€the€principal€to€continue€a€business€ofŠ n) Šwhich€the€Ō_ŌsettlorŌ_Ō€was€a€sole€proprietor€or€partner,€the€net€profit€ofŠ 7ņ Šthe€business,€computed€in€accordance€with€generally€acceptedŠ »  Šaccounting€principles,€is€income,€but€a€loss€during€an€annualŠ É„! Šaccounting€period€is€chargeable€against€principal€and€may€not€beŠ ’M" Šcarried€into€any€other€annual€accounting€period€for€the€purposeŠ [ # Šof€calculating€net€income.Š $!ß$ Šą %" ą(b)Generally€accepted€accounting€principles€shall€be€used€toŠ ķ!Ø% Šdetermine€income€from€an€agricultural€or€farming€operation,Š ¶"q& Šincluding€the€raising€of€animals€or€the€operation€of€a€nursery.Š (#:'  €€(Šņ ņSECTION€116.152.DISTRIBUTION€FROM€TRUST€ORŠ Ü$—( ŠESTATE.ó óŠ „%` ) Šą  ąA€trustee€shall€allocate€to€income€an€amount€received€as€aŠ ©d Šdistribution€of€income€from€a€trust€or€an€estate€in€which€the€trust€hasŠ r- Šan€interest€other€than€a€purchased€interest,€and€shall€allocate€toŠ ;ö Šprincipal€an€amount€received€as€a€distribution€of€principal€from€suchŠ æ Ša€trust€or€estate.If€a€trustee€purchases€an€interest€in€a€trust€that€is€anŠ Ķˆ Šinvestment€entity,€or€a€decedent€or€donor€transfers€an€interest€in€suchŠ – Q Ša€trust€to€a€trustee,€Section€116.151€or€116.178€applies€to€a€receiptŠ _  Šfrom€the€trust.Š  ( ć „„ŠTexas€does€not€have€a€statute€similar€to€SectionŠ Ü$—  Š116.152€of€the€Act,€but€this€section€appears€toŠ „%`  Šmerely€clarify€logical€concepts.Š '©d „„'ŠŠ Ü$— ŠŠ (©d  €€(Šņ ņSECTION€116.153.BUSINESS€AND€OTHER€ACTIVITIESŠ … @ ŠCONDUCTED€BY€TRUSTEE.ó óŠ N  Šą  ą(a)If€a€trustee€who€conducts€a€business€or€other€activityŠ Ņ Šdetermines€that€it€is€in€the€best€interest€of€all€the€beneficiaries€toŠ ą›  Šaccount€separately€for€the€business€or€activity€instead€of€accountingŠ ©d  Šfor€it€as€part€of€the€trustššs€general€accounting€records,€the€trustee€mayŠ r-  Šmaintain€separate€accounting€records€for€its€transactions,€whether€orŠ ;ö  Šnot€its€assets€are€segregated€from€other€trust€assets.Š æ  Šą  ą(b)A€trustee€who€accounts€separately€for€a€business€or€otherŠ Ķˆ  Šactivity€may€determine€the€extent€to€which€its€net€cash€receipts€mustŠ –Q  Šbe€retained€for€working€capital,€the€acquisition€or€replacement€ofŠ _  Šfixed€assets,€and€other€reasonably€foreseeable€needs€of€the€businessŠ (ć  Šor€activity,€and€the€extent€to€which€the€remaining€net€cash€receiptsŠ ń¬ Šare€accounted€for€as€principal€or€income€in€the€trustššs€generalŠ ŗu Šaccounting€records.If€a€trustee€sells€assets€of€the€business€or€otherŠ ƒ> Šactivity,€other€than€in€the€ordinary€course€of€the€business€or€activity,Š L Šthe€trustee€shall€account€for€the€net€amount€received€as€principal€inŠ Š Šthe€trustššs€general€accounting€records€to€the€extent€the€trusteeŠ Ž™ Šdetermines€that€the€amount€received€is€no€longer€required€in€theŠ §b Šconduct€of€the€business.Š p+ Šą  ą(c)Activities€for€which€a€trustee€may€maintain€separateŠ 9ō Šaccounting€records€include:Š ½ Šą  ąą r ą(1)retail,€manufacturing,€service,€and€other€traditionalŠ Ė† Šbusiness€activities;Š ”O Šą  ąą r ą(2)farming;Š ] Šą  ąą r ą(3)raising€and€selling€livestock€and€other€animals;Š & į Šą  ąą r ą(4)management€of€rental€properties;Š ļ Ŗ Šą  ąą r ą(5)extraction€of€minerals€and€other€natural€resources;Š ø!s Šą  ąą r ą(6)timber€operations;€andŠ "< Šą  ąą r ą(7)activities€to€which€Section€116.177€applies.Š  J# „„ŠThere€is€no€corresponding€Texas€statute.Š '… @  „„'ŠŠ (… @!  €€(Šņ ņPart€2.€€Receipts€Not€Normally€Apportionedó óŠ  §$b" „„ŠŠ '§$b# „„'Šā āŠ (§$b$  €€(Šņ ņSECTION€116.161.PRINCIPAL€RECEIPTS.ó óŠ ©d Šā āą  ąA€trustee€shall€allocate€to€principal:Š r- Šą  ąą r ą(1)to€the€extent€not€allocated€to€income€under€this€chapter,Š ;ö Šassets€received€from€a€transferor€during€the€transferorššs€lifetime,€aŠ æ Šdecedentššs€estate,€a€trust€with€a€terminating€income€interest,€or€aŠ Ķˆ Špayer€under€a€contract€naming€the€trust€or€its€trustee€as€beneficiary;Š – Q Šą  ąą r ą(2)money€or€other€property€received€from€the€sale,€exchange,Š _  Šliquidation,€or€change€in€form€of€a€principal€asset,€including€realizedŠ ( ć Šprofit,€subject€to€this€Ō_ŌsubchapterŌ_Ō;Š ń ¬  Šą  ąą r ą(3)amounts€recovered€from€third€parties€to€reimburse€the€trustŠ ŗ u  Šbecause€of€disbursements€described€in€Section€116.202€(a)€(7)€or€forŠ ƒ >  Šother€reasons€to€the€extent€not€based€on€the€loss€of€income;Š L  Šą  ąą r ą(4)proceeds€of€property€taken€by€eminent€domain,€but€aŠ Š  Šseparate€award€made€for€the€loss€of€income€with€respect€to€anŠ Ž™  Šaccounting€period€during€which€a€current€income€beneficiary€had€aŠ §b  Šmandatory€income€interest€is€income;Š p+  Šą  ąą r ą(5)net€income€received€in€an€accounting€period€duringŠ 9ō  Šwhich€there€is€no€beneficiary€to€whom€a€trustee€may€or€mustŠ ½  Šdistribute€income;€andŠ Ė† Šą  ąą r ą(6)other€receipts€as€provided€in€Part€3.Š  ”O „„ŠSection€116.161€of€the€Uniform€Act€containsŠ ©d Šbroader€rules€than€šš€113.102€of€the€Texas€TrustŠ r- ŠCode,€but€their€impact€is€similar.Š ';ö „„'Šņ ņšš€113.102€€Principal€and€Incomeó óŠ ©d Š...Š r- Šą %" ą(b)Principal€includes:Š ;ö Šą %" ąą # ą(1)consideration€received€by€the€trustee€on€the€sale€orŠ æ Šother€transfer€of€principal,€repayment€of€the€principal€of€a€loan,€orŠ Ķˆ Ša€refund,€replacement,€or€change€in€the€form€of€principal;Š – Q Šą %" ąą # ą(2)proceeds€of€property€taken€on€eminent€domainŠ _  Šproceedings;Š ( ć Š...Š ń ¬  Šą %" ąą # ą(8)profit€resulting€from€any€change€in€the€form€ofŠ ŗ u! Šprincipal,€except€as€provided€in€Section€113.110€of€this€Act€onŠ ƒ >" ŠŌ_ŌunderproductiveŌ_Ō€property;Š (L #  €€(Šņ ņSECTION€116.162.RENTAL€PROPERTY.ó óŠ ń¬$ Šą  ąTo€the€extent€that€a€trustee€accounts€for€receipts€from€rentalŠ ŗu% Šproperty€pursuant€to€this€section,€the€trustee€shall€allocate€to€incomeŠ ƒ>& Šan€amount€received€as€rent€of€real€or€personal€property,€including€anŠ L' Šamount€received€for€cancellation€or€renewal€of€a€lease.An€amountŠ Š( Šreceived€as€a€refundable€deposit,€including€a€security€deposit€or€aŠ Ž™) Šdeposit€that€is€to€be€applied€as€rent€for€future€periods,€must€be€addedŠ §b* Što€principal€and€held€subject€to€the€terms€of€the€lease€and€is€notŠ p++ Šavailable€for€distribution€to€a€beneficiary€until€the€trusteeššsŠ 9ō, Šcontractual€obligations€have€been€satisfied€with€respect€to€thatŠ ½- Šamount.Š  Ė†. „„ŠThese€sections€have€no€significant€differences.Š 'ń¬/ „„'Šņ ņšš€113.102€€Principal€and€Incomeó óŠ ń¬0 Šą %" ą(a)Income€is€the€return€derived€from€the€use€of€principal,Š ŗu1 Šincluding:Š ƒ>2 Šą %" ąą # ą(1)rent€on€real€or€personal€property,€including€sumsŠ L3 Šreceived€for€cancellation€or€renewal€of€a€lease;Š Š4 Š...Š Ž™5 Šą %" ą(b)Principal€includes:Š §b6 Šą %" ąą # ą(1)consideration€received€by€the€trustee€on€the€sale€orŠ p+7 Šother€transfer€of€principal,€repayment€of€the€principal€of€a€loan,€orŠ 9ō8 Ša€refund,€replacement,€or€change€in€the€form€of€principal;Š (½9  €€(Šņ ņSECTION€116.163.OBLIGATION€TO€PAY€MONEY.ó óŠ (ć: Šą  ą(a)An€amount€received€as€interest,€whether€determined€at€a€fixed,Š ń¬; Švariable,€or€floating€rate,€on€an€obligation€to€pay€money€to€theŠ ŗ u< Štrustee,€including€an€amount€received€as€consideration€for€prepayingŠ ƒ!>= Šprincipal,€must€be€allocated€to€income€without€any€provision€forŠ L"> Šamortization€of€premium.Š #Š? Šą  ą(b)A€trustee€shall€allocate€to€principal€an€amount€received€fromŠ Ž#™@ Šthe€sale,€redemption,€or€other€disposition€of€an€obligation€to€payŠ §$bA Šmoney€to€the€trustee€more€than€one€year€after€it€is€purchased€orŠ p%+ B Šacquired€by€the€trustee,€including€an€obligation€whose€purchaseŠ ©d Šprice€or€value€when€it€is€acquired€is€less€than€its€value€at€maturity.IfŠ r- Šthe€obligation€matures€within€one€year€after€it€is€purchased€orŠ ;ö Šacquired€by€the€trustee,€an€amount€received€in€excess€of€its€purchaseŠ æ Šprice€or€its€value€when€acquired€by€the€trust€must€be€allocated€toŠ Ķˆ Šincome.Š – Q Šą  ą(c)This€section€does€not€apply€to€an€obligation€to€which€SectionŠ _  Š116.172,€116.273,€116.174,€116.175,€116.177€or€116.178€applies.Š  ( ć „„ŠThese€sections€are€similar.€€Section€116.163(b)Š (ć  Šof€the€Uniform€Act€has€no€counterpart€in€theŠ ń¬  ŠTexas€Trust€Code.€€It€relates€to€the€allocation€ofŠ ŗ u  Šreceipts€from€discount€obligations,€includingŠ ƒ!>  Šzero€coupon€bonds.Š L"  ŠŠ '©d „„'Šņ ņšš€113.102€€Principal€and€Incomeó óŠ (ć Šą %" ą(a)Income€is€the€return€derived€from€the€use€of€principal,Š ń¬ Šincluding:Š ŗ u Šą %" ąą # ą(2)interest€on€money€lent,€including€sums€received€asŠ ƒ!> Šconsideration€for€the€privilege€of€prepayment€of€principal€exceptŠ L" Šas€provided€in€Section€113.105€of€this€Act€on€bond€premium€andŠ #Š Šbond€discount;Š Ž#™ ŠĢņ ņšš€113.102€€Principal€and€Incomeó óŠ p%+  Šą %" ą(b)Principal€includes:Š ©d Šą %" ąą # ą(1)consideration€received€by€the€trustee€on€the€sale€orŠ r- Šother€transfer€of€principal,€repayment€of€the€principal€of€a€loan,€orŠ ;ö Ša€refund,€replacement,€or€change€in€the€form€of€principal;Š æ ŠĢņ ņšš€113.105€€Bond€Premium€and€Discountó óŠ – Q Šą %" ą(a)Bonds€and€other€obligations€for€the€payment€of€moneyŠ _  Šand€the€proceeds€of€their€sale,€redemption,€or€other€dispositionŠ ( ć Šare€principal.€€Amortization€of€bond€premiums€or€accumulationŠ ń ¬  Šfor€discount€may€be€made€in€the€trustee's€discretion.Š ŗ u  Šą %" ą(b)The€increase€in€value€of€a€bond€or€other€obligation€for€theŠ ƒ >  Špayment€of€money€payable€at€a€future€time€in€accordance€with€aŠ L  Šfixed€schedule€of€appreciation€in€excess€of€the€price€at€which€itŠ Š  Šwas€issued€is€distributable€as€income€to€the€beneficiary€who€is€theŠ Ž™  Šincome€beneficiary€at€the€time€of€the€increase.Š (§b   €€(Šņ ņSECTION€116.164.INSURANCE€POLICIES€AND€SIMILARŠ æ  ŠCONTRACTS.ó ó€Š Ķˆ  Šą  ą(a)Except€as€otherwise€provided€in€Subsection€(b),€a€trustee€shallŠ –Q Šallocate€to€principal€the€proceeds€of€a€life€insurance€policy€or€otherŠ _ Šcontract€in€which€the€trust€or€its€trustee€is€named€as€beneficiary,Š (ć Šincluding€a€contract€that€insures€the€trust€or€its€trustee€against€loss€forŠ ń¬ Šdamage€to,€destruction€of,€or€loss€of€title€to€a€trust€asset.The€trusteeŠ ŗu Šshall€allocate€dividends€on€an€insurance€policy€to€income€if€theŠ ƒ> Špremiums€on€the€policy€are€paid€from€income,€and€to€principal€if€theŠ L Špremiums€are€paid€from€principal.Š Š Šą  ą(b)A€trustee€shall€allocate€to€income€proceeds€of€a€contract€thatŠ Ž™ Šinsures€the€trustee€against€loss€of€occupancy€or€other€use€by€anŠ §b Šincome€beneficiary,€loss€of€income,€or,€subject€to€Section€116.153,Š p+ Šloss€of€profits€from€a€business.Š 9ō Šą  ą(c)This€section€does€not€apply€to€a€contract€to€which€SectionŠ ½ Š116.172€applies.Š  Ė† „„ŠThe€sections€are€similar.€€Section€116.164€of€theŠ æ  ŠUniform€Act€provides€more€detail.Š 'Ķˆ ! „„'Šņ ņšš€113.102€€Principal€and€Incomeó óŠ æ " Šą %" ą(b)Principal€includes:Š Ķˆ # Š...Š –Q$ Šą %" ąą # ą(3)proceeds€of€insurance€on€property€forming€part€of€theŠ _% Šprincipal,€except€proceeds€of€insurance€upon€a€separate€interestŠ (ć& Šof€an€income€beneficiary;Š (ń¬'  €€(Šņ ņPart€3.€€Receipts€Normally€Apportionedó óŠ  (ć( „„ŠŠ '(ć) „„'ŠŠ ((ć*  €€(Šņ ņSECTION€116.171.INSUBSTANTIAL€ALLOCATIONS€NOTŠ … @+ ŠREQUIRED.ó óŠ N! , Šą  ąIf€a€trustee€determines€that€an€allocation€between€principal€andŠ "Ņ- Šincome€required€by€Section€116.172,€116.173,€116.174,€116.175,€orŠ ą"›. Š116.178€is€insubstantial,€the€trustee€may€allocate€the€entire€amountŠ ©#d/ Što€principal€unless€one€of€the€circumstances€described€in€SectionŠ r$-0 Š116.005(c)€applies€to€the€allocation.€€This€power€may€be€exercisedŠ ;%ö1 Šby€a€Ō_ŌcotrusteeŌ_Ō€in€the€circumstances€described€in€Section€116.005(d)Š ©d Šand€may€be€released€for€the€reasons€and€in€the€manner€described€inŠ r- ŠSection€116.005(e).€Š  ;ö „„ŠSection€116.171€of€the€Act€has€no€TexasŠ … @ Šcounterpart.Š N!  ŠŠ '©d „„'ŠŠ … @ ŠŠ (©d  €€(Šņ ņSECTION€116.172.DEFERRED€COMPENSATION,Š ˜S ŠANNUITIES,€AND€SIMILAR€PAYMENTS.ó óŠ a  Šą  ą(a)In€this€section:Š * å Šą  ąą r ą(1)€"Future€payment€assetšš€means€the€asset€from€which€aŠ ó ® Špayment€is€derived.Š ¼ w Šą  ąą r ą(2)"Payment"€means€a€payment€that€a€trustee€may€receiveŠ … @ Šover€a€fixed€number€of€years€or€during€the€life€of€one€or€moreŠ N  Šindividuals€because€of€services€rendered€or€property€transferred€toŠ Ņ  Šthe€payer€in€exchange€for€future€payments.€€The€term€includes€aŠ ą›  Špayment€made€in€money€or€property€from€the€payerššs€general€assetsŠ ©d  Šor€from€a€separate€fund€created€by€the€payer,€including€a€private€orŠ r-  Šcommercial€annuity,€an€individual€retirement€account,€and€aŠ ;ö  Špension,€profit„sharing,€stock„bonus,€or€stock„ownership€plan.Š æ  Šą  ą(b)To€the€extent€that€the€payer€characterizes€a€payment€asŠ Ķˆ  Šinterest€or€a€dividend€or€a€payment€made€in€lieu€of€interest€or€aŠ –Q Šdividend,€a€trustee€shall€allocate€it€to€income.€€The€trustee€shallŠ _ Šallocate€to€principal€the€balance€of€the€payment€and€any€otherŠ (ć Špayment€received€in€the€same€accounting€period€that€is€notŠ ń¬ Šcharacterized€as€interest,€a€dividend,€or€an€equivalent€payment.Š ŗu Šą  ą(c)If€no€part€of€a€payment€is€characterized€as€interest,€a€dividend,Š ƒ> Šor€an€equivalent€payment,€and€all€or€part€of€the€payment€is€requiredŠ L Što€be€made,€a€trustee€shall€allocate€to€income€the€part€of€the€paymentŠ Š Šthat€does€not€exceed€an€amount€equal€to:Š Ž™ Šą  ąą r ą(1)four€percent€of€the€fair€market€value€of€the€future€paymentŠ §b Šasset€as€determined€under€Subsection€(d);Š p+ Šą  ąą r ą(2)the€total€amount€that€the€trustee€has€allocated€to€incomeŠ 9ō Šfor€a€previous€payment€received€from€the€future€payment€asset€duringŠ ½ Šthe€accounting€period€prescribed€by€Subsection€(d).Š Ė† Šą  ą(d)For€purposes€of€Subsection€(c)(1),€the€determination€of€aŠ ”O Šfuture€payment€asset€is€made€on€the€later€of:Š ] Šą  ąą r ą(1)the€date€on€which€the€future€payment€right€first€becomesŠ & į  Šsubject€to€the€trust;€orŠ ļ Ŗ! Šą  ąą r ą(2)the€first€day€of€the€trust's€accounting€period€during€whichŠ ø!s" Šthe€future€payment€asset€is€received.Š "<# Šą  ą(e)For€each€year€a€future€payment€asset€is€made,€the€amountŠ J#$ Šdetermined€under€Subsection€(c)€must€be€prorated€on€a€daily€basisŠ $Ī% Šunless€the€determination€of€a€future€payment€asset€is€made€underŠ Ü$—& ŠSubsection€(d)(2)€and€is€for€an€accounting€period€of€365€days€orŠ „%` ' Šmore.Š ©d Šą  ą(f)A€trustee€shall€allocate€to€principal€the€part€of€the€paymentŠ r- Šdescribed€by€Subsection€(c)€that€is€not€allocated€to€income.Š ;ö Šą  ą(g)€If€no€part€of€a€payment€is€required€to€be€made€or€the€paymentŠ æ Šreceived€is€the€entire€amount€to€which€the€trustee€is€entitled,€theŠ Ķˆ Štrustee€shall€allocate€the€entire€payment€to€principal.€€For€purposesŠ – Q Šof€Subsection€(c)€and€this€subsection,€a€payment€is€not€š šrequired€toŠ _  Šbe€madešš€to€the€extent€that€it€is€made€because€the€trustee€exercisesŠ ( ć Ša€right€of€withdrawal.Š ń ¬  Šą  ą(h)If,€to€obtain€an€estate€tax€marital€deduction€for€a€trust,€aŠ ŗ u  Štrustee€must€allocate€more€of€a€payment€to€income€than€provided€forŠ ƒ >  Šby€this€section,€the€trustee€shall€allocate€to€income€the€additionalŠ L  Šamount€necessary€to€obtain€the€marital€deduction.Š Š  ŠŠ  Ž™  „„ŠUnder€šš€113.109€of€the€Texas€Trust€Code,Š ˜S Šproceeds€of€a€deferred€payment€right€are€incomeŠ a  Šup€to€five€percent€of€the€inventory€value€of€theŠ * å Šright.€€Apparently€the€trustee€has€discretion€toŠ ó ® Šallocate€less€to€income.Š ¼ w ŠSection€116.172€of€the€Uniform€Act€isŠ … @ Šsignificantly€different.€€It€only€applies€toŠ N  Špayments€for€services€rendered€or€properlyŠ Ņ Štransferred.€€To€the€extent€such€a€payment€isŠ ą›  Šcharacterized€as€interest€or€dividend,€the€trusteeŠ ©d  Šmust€allocate€it€to€income.€€The€trustee€mustŠ r-  Šallocate€the€rest€to€principal.€€If€no€part€of€theŠ ;ö  Špayment€is€characterized€as€interest€or€dividendŠ æ  Šand€the€payment€is€mandatory,€trustee€mustŠ Ķˆ  Šallocate€to€income€payment€received€to€theŠ –Q Šextent€the€sum€of€all€payments€does€not€exceedŠ _ Š4%€of€the€fair€market€value€of€the€futureŠ (ć Špayment€asset.€€However,€Section€116.172(h)Š ń¬  Šallows€special€allocation€to€protect€a€maritalŠ ŗu! Šdeduction.Š ƒ>" ŠŠ '©d „„'Šņ ņšš€113.109€€Property€Other€Than€Natural€Resources€Subject€toŠ ˜S ŠDepletionó óŠ a  Šą %" ą(a)If€the€principal€of€a€trust€includes€a€deferred€paymentŠ * å Šright,€the€proceeds€of€the€right,€on€receipt,€are€income€up€to€fiveŠ ó ® Špercent€of€the€inventory€value€of€the€right,€determined€separatelyŠ ¼ w Šfor€each€year€following€the€year€in€which€the€right€first€becomesŠ … @ Šsubject€to€the€trust.€€The€remainder€of€the€proceeds€is€principal.€Š N  ŠThe€allocation€to€income€is€computed€in€the€same€manner€inŠ Ņ  Šwhich€interest€under€a€loan€of€the€initial€inventory€amount€wouldŠ ą›  Šbe€computed,€at€five€percent€interest€compounded€annually,€ifŠ ©d  Šperiodic€payments€are€made€by€the€borrower€to€the€lender.Š r-  Šą %" ą(b)For€the€first€year,€inventory€value€is€determined€asŠ ;ö  Šprovided€by€this€subtitle.€€For€each€year€after€the€first€year,€theŠ æ  Šinventory€value€is:Š Ķˆ  Šą %" ąą # ą(1)reduced€to€the€extent€that€proceeds€of€the€right€wereŠ –Q Šallocated€to€principal€during€the€preceding€year;€andŠ _ Šą %" ąą # ą(2)increased€to€the€extent€that€the€proceeds€receivedŠ (ć Šduring€the€preceding€year€were€less€than€five€percent€of€theŠ ń¬ Šinventory€value€for€that€year.Š ŗu Šą %" ą(c)While€the€deferred€payment€right€is€under€administrationŠ ƒ> Šin€a€decedent's€estate,€income€and€principal€are€determined€byŠ L Šusing€the€fiscal€year€of€the€estate€and€ending€on€the€date€the€trustŠ Š Šis€funded€with€the€right.€€After€the€administration€of€the€estate,€theŠ Ž™ Šfiscal€year€of€the€trust€is€used.€€The€five€percent€allocation€toŠ §b Šincome€is€prorated€for€€a€year€that€is€less€than€12€months.Š p+ Šą %" ą(d)The€proceeds€of€a€deferred€payment€right€include€allŠ 9ō Šreceipts€relating€to€the€right,€whether€or€not€the€receipts€areŠ ½ Šperiodic.€€After€the€proceeds€are€received€by€the€trustee€andŠ Ė† Šallocated,€this€section€does€not€apply€to€the€proceeds,€except€toŠ ”O Šthe€extent€the€proceeds€include€a€deferred€payment€right.Š ] Šą %" ą(e)In€this€section:Š & į  Šą %" ąą # ą(1)"Deferred€payment€right"€means€a€depletable€asset,Š ļ Ŗ! Šother€than€natural€resources€or€timber,€consisting€of€the€right€toŠ ø!s" Šproperty€under€a€contract,€account,€or€other€arrangement€that€isŠ "<# Špayable€not€earlier€than€12€months€after€the€date€the€rightŠ J#$ Šbecomes€subject€to€the€trust.€€A€deferred€payment€right€includesŠ $Ī% Šthe€right€to€receive€a€periodic,€annuity,€installment,€or€single€sumŠ Ü$—& Šfuture€payment:Š „%` ' Šą %" ąą # ąą $ ą(A)under€a€leasehold,€patent,€copyright,€or€royalty;Š ©d Šą %" ąą # ąą $ ą(B)of€income€in€respect€of€a€decedent€under€SectionŠ r- Š691€of€the€Internal€Revenue€Code€of€1986€(26€U.S.C.€Sec.€691);Š ;ö Šą %" ąą # ąą $ ą(C)of€death€benefits;Š æ Šą %" ąą # ąą $ ą(D)of€benefits€under€a€Ō_ŌnonqualifiedŌ_Ō€plan€of€deferredŠ Ķˆ Šcompensation€or€similar€arrangement;€orŠ – Q Šą %" ąą # ąą $ ą(E)under€an€employee's€trust,€a€retirement€account,€aŠ _  Šplan€described€by€Section€403€of€the€Internal€Revenue€Code€ofŠ ( ć Š1986€(26€U.S.C.€Sec.€403),€or€an€employee€benefit€plan.Š ń ¬  Šą %" ąą # ą(2)"Employee€benefit€plan"€means€an€employee€benefitŠ ŗ u  Šplan€as€defined€by€Section€1002,€Employee€Retirement€IncomeŠ ƒ >  ŠSecurity€Act€of€1974€(Ō_ŌERISAŌ_Ō)€(29€U.S.C.€Sec.€1002),€a€plan€thatŠ L  Šdoes€not€meet€the€requirements€of€an€employee€benefit€plan€underŠ Š  ŠŌ_ŌERISAŌ_Ō€because€the€plan€does€cover€common€law€employees,€orŠ Ž™  Ša€plan€that€is€similar€to€an€employee€benefit€plan€under€Ō_ŌERISAŌ_ŌŠ §b  Šwhether€or€not€the€plan€is€covered€under€Ō_ŌSubchapterŌ_Ō€I€of€Ō_ŌERISAŌ_Ō.Š p+  Šą %" ąą # ą(3)"Year"€means€the€fiscal€year€for€federal€income€taxŠ 9ō  Šreporting€purposes.Š (½   €€(Šņ ņSECTION€116.173.LIQUIDATING€ASSET.ó óŠ _ Šą  ą(a)In€this€section,€š šliquidating€assetšš€means€an€asset€whoseŠ (ć Švalue€will€diminish€or€terminate€because€the€asset€is€expected€toŠ ń¬ Šproduce€receipts€for€a€period€of€limited€duration.€€The€term€includesŠ ŗu Ša€leasehold,€patent,€copyright,€royalty€right,€and€right€to€receiveŠ ƒ> Špayments€during€a€period€of€more€than€one€year€under€anŠ L Šarrangement€that€does€not€provide€for€the€payment€of€interest€on€theŠ Š Šunpaid€balance.€€The€term€does€not€include€a€payment€subject€toŠ Ž™ ŠSection€116.172,€resources€subject€to€Section€116.174,€timberŠ §b Šsubject€to€Section€116.175,€an€activity€subject€to€Section€116.177,Š p+ Šan€asset€subject€to€Section€116.178,€or€any€asset€for€which€the€trusteeŠ 9ō Šestablishes€a€reserve€for€depreciation€under€Section€116.203.Š ½ Šą  ą(b)A€trustee€shall€allocate€to€income€10€percent€of€the€receiptsŠ Ė† Šfrom€a€liquidating€asset€and€the€balance€to€principal.Š ”O  Šą  ą(c)The€trustee€may€allocate€a€receipt€from€any€interest€in€aŠ ]! Šliquidating€asset€the€trust€owns€on€January€1,€2004,€in€the€mannerŠ & į" Šprovided€by€this€chapter€or€in€any€lawful€manner€used€by€the€trusteeŠ ļ Ŗ# Šbefore€January€1,€2004,€to€make€the€same€allocation.Š  ø!s$ „„ŠIn€contrast€to€šš€113.109€of€the€Texas€Trust€CodeŠ _% Š(described€in€previous€comment),€SectionŠ (ć& Š116.173€of€the€Uniform€Act€requires€the€trusteeŠ ń¬' Što€allocate€ten€percent€of€receipts€from€aŠ ŗu( Šliquidating€asset€to€income€and€the€rest€toŠ ƒ>) Šprincipal,€but€the€trustee€may€continue€usingŠ L* Šcurrent€allocation€method,€if€lawful,€forŠ Š+ Šliquidating€assets€held€on€January€1,€2004.Š 'Ž™, „„'Šņ ņšš€113.109€€Property€Other€Than€Natural€Resources€Subject€toŠ _- ŠDepletionó óŠ (ć. Šą %" ą(a)If€the€principal€of€a€trust€includes€a€deferred€paymentŠ ń¬/ Šright,€the€proceeds€of€the€right,€on€receipt,€are€income€up€to€fiveŠ ŗu0 Špercent€of€the€inventory€value€of€the€right,€determined€separatelyŠ ƒ>1 Šfor€each€year€following€the€year€in€which€the€right€first€becomesŠ L2 Šsubject€to€the€trust.€€The€remainder€of€the€proceeds€is€principal.€Š Š3 ŠThe€allocation€to€income€is€computed€in€the€same€manner€inŠ Ž™4 Šwhich€interest€under€a€loan€of€the€initial€inventory€amount€wouldŠ §b5 Šbe€computed,€at€five€percent€interest€compounded€annually,€ifŠ p+6 Šperiodic€payments€are€made€by€the€borrower€to€the€lender.Š 9ō7 Šą %" ą(b)For€the€first€year,€inventory€value€is€determined€asŠ ½8 Šprovided€by€this€subtitle.€€For€each€year€after€the€first€year,€theŠ Ė†9 Šinventory€value€is:Š ”O: Šą %" ąą # ą(1)reduced€to€the€extent€that€proceeds€of€the€right€wereŠ ]; Šallocated€to€principal€during€the€preceding€year;€andŠ & į< Šą %" ąą # ą(2)increased€to€the€extent€that€the€proceeds€receivedŠ ļ Ŗ= Šduring€the€preceding€year€were€less€than€five€percent€of€theŠ ø!s> Šinventory€value€for€that€year.Š "<? Šą %" ą(c)While€the€deferred€payment€right€is€under€administrationŠ J#@ Šin€a€decedent's€estate,€income€and€principal€are€determined€byŠ $ĪA Šusing€the€fiscal€year€of€the€estate€and€ending€on€the€date€the€trustŠ Ü$—B Šis€funded€with€the€right.€€After€the€administration€of€the€estate,€theŠ „%` C ŠŌ_Ōfiscal€year€of€the€trust€is€used.€€The€five€percent€allocation€toŠ ©d Šincome€is€prorated€for€€a€year€that€is€less€than€12€months.Š r- Šą %" ą(d)The€proceeds€of€a€deferred€payment€right€include€allŠ ;ö Šreceipts€relating€to€the€right,€whether€or€not€the€receipts€areŠ æ Šperiodic.€€After€the€proceeds€are€received€by€the€trustee€andŠ Ķˆ Šallocated,€this€section€does€not€apply€to€the€proceeds,€except€toŠ – Q Šthe€extent€the€proceeds€include€a€deferred€payment€right.Š _  Šą %" ą(e)In€this€section:Š ( ć Šą %" ąą # ą(1)"Deferred€payment€right"€means€a€depletable€asset,Š ń ¬  Šother€than€natural€resources€or€timber,€consisting€of€the€right€toŠ ŗ u  Šproperty€under€a€contract,€account,€or€other€arrangement€that€isŠ ƒ >  Špayable€not€earlier€than€12€months€after€the€date€the€rightŠ L  Šbecomes€subject€to€the€trust.€€A€deferred€payment€right€includesŠ Š  Šthe€right€to€receive€a€periodic,€annuity,€installment,€or€single€sumŠ Ž™  Šfuture€payment:Š §b  Šą %" ąą # ąą $ ą(A)under€a€leasehold,€patent,€copyright,€or€royalty;Š p+  Šą %" ąą # ąą $ ą(B)of€income€in€respect€of€a€decedent€under€SectionŠ 9ō  Š691€of€the€Internal€Revenue€Code€of€1986€(26€U.S.C.€Sec.€691);Š ½  Šą %" ąą # ąą $ ą(C)of€death€benefits;Š Ė† Šą %" ąą # ąą $ ą(D)of€benefits€under€a€nonqualified€plan€of€deferredŠ ”O Šcompensation€or€similar€arrangement;€orŠ ] Šą %" ąą # ąą $ ą(E)under€an€employee's€trust,€a€retirement€account,€aŠ &į Šplan€described€by€Section€403€of€the€Internal€Revenue€Code€ofŠ ļŖ Š1986€(26€U.S.C.€Sec.€403),€or€an€employee€benefit€plan.Š øs Šą %" ąą # ą(2)"Employee€benefit€plan"€means€an€employee€benefitŠ < Šplan€as€defined€by€Section€1002,€Employee€Retirement€IncomeŠ J ŠSecurity€Act€of€1974€(ERISA)€(29€U.S.C.€Sec.€1002),€a€plan€thatŠ Ī Šdoes€not€meet€the€requirements€of€an€employee€benefit€plan€underŠ Ü— ŠERISA€because€the€plan€does€cover€common€law€employees,€orŠ „` Ša€plan€that€is€similar€to€an€employee€benefit€plan€under€ERISAŠ n) Šwhether€or€not€the€plan€is€covered€under€Subchapter€I€of€ERISA.Š 7ņ Šą %" ąą # ą(3)"Year"€means€the€fiscal€year€for€federal€income€taxŠ »  Šreporting€purposes.Š (É„!  €€(Šņ ņSECTION€116.174.MINERALS,€WATER,€AND€OTHERŠ & į" ŠNATURAL€RESOURCES.ó óŠ ļ Ŗ# Šą  ą(a)To€the€extent€that€a€trustee€accounts€for€receipts€from€anŠ ø!s$ Šinterest€in€minerals€or€other€natural€resources€pursuant€to€this€section,Š "<% Šthe€trustee€shall€allocate€them€as€follows:Š J#& Šą  ąą r ą(1)If€received€as€nominal€delay€rental€or€nominal€annual€rentŠ $Ī' Šon€a€lease,€a€receipt€must€be€allocated€to€income.Š Ü$—( Šą  ąą r ą(2)If€received€from€a€production€payment,€a€receipt€must€beŠ „%` ) Šallocated€to€income€if€and€to€the€extent€that€the€agreement€creatingŠ ©d Šthe€production€payment€provides€a€factor€for€interest€or€itsŠ r- Šequivalent.€€The€balance€must€be€allocated€to€principal.Š ;ö Šą  ąą r ą(3)If€an€amount€received€as€a€royalty,€shut„in„well€payment,Š æ Štake„or„pay€payment,€bonus,€or€delay€rental€is€more€than€nominal,Š Ķˆ Šthe€trustee€shall€allocate€the€receipt€equitably.€€Š – Q Šą  ąą r ą(4)If€an€amount€is€received€from€a€working€interest€or€anyŠ _  Šother€interest€not€provided€for€in€Subdivision€(1),€(2),€or€(3),€theŠ ( ć Štrustee€must€allocate€the€receipt€equitably.€Š ń ¬  Šą  ą(b)An€amount€received€on€account€of€an€interest€in€water€that€isŠ ŗ u  Šrenewable€must€be€allocated€to€income.€€If€the€water€is€not€renewable,Š ƒ >  Šthe€trustee€must€allocate€the€receipt€equitably.€Š L  Šą  ą(c)This€chapter€applies€whether€or€not€a€decedent€or€donor€wasŠ Š  Šextracting€minerals,€water,€or€other€natural€resources€before€theŠ Ž™  Šinterest€became€subject€to€the€trust.Š §b  Šą  ą(d)The€trustee€may€allocate€a€receipt€from€any€interest€inŠ p+  Šminerals,€water,€or€other€natural€resources€the€trust€owns€on€JanuaryŠ 9ō  Š1,€2004,€in€the€manner€provided€by€this€chapter€or€in€any€lawfulŠ ½  Šmanner€used€by€the€trustee€before€January€1,€2004,€to€make€the€sameŠ Ė† Šallocation.€€The€trustee€shall€allocate€a€receipt€from€any€interest€inŠ ”O Šminerals,€water,€or€other€natural€resources€acquired€by€the€trust€afterŠ ] ŠJanuary€1,€2004,€in€the€manner€provided€by€this€chapter.€€Š &į Šą  ą(e)An€allocation€of€a€receipt€under€this€section€is€presumed€to€beŠ ļŖ Šequitable€if€the€amount€allocated€to€principal€is€equal€to€the€amountŠ øs Šallowed€by€the€Internal€Revenue€Code€of€1986€as€a€deduction€forŠ < Šdepletion€of€the€interest.Š  J „„ŠThe€key€difference€between€these€sections€isŠ & į Šhow€each€treats€royalties,€bonuses,€and€workingŠ ļ Ŗ Šinterests.€€Under€the€Uniform€Act,€the€trusteeŠ ø!s Šmust€allocate€such€receipts€equitably,€and€isŠ "< Špresumed€to€do€so€if€trustee€allocates€toŠ J# Šprincipal€the€amount€allowed€as€an€income€taxŠ $Ī  Šdepletion€deduction.€Under€the€Texas€TrustŠ Ü$—! ŠCode,€twenty„seven€and€one„half€percent€of€theŠ „%` " Šgross€proceeds€(not€to€exceed€fifty€percent€of€theŠ ©d Šnet€proceeds)€is€allocated€to€principal€and€theŠ r- Šbalance€is€income.€€But€note€that€the€trustee€canŠ ;ö Šcontinue€its€current€allocation€method€for€suchŠ æ Šassets€owned€on€January€1,€2004.Š Ķˆ ŠSection€116.174(c)€abolishes€the€open€mineŠ – Q Šdoctrine€as€it€applies€to€allocations.Š '_  „„'Šņ ņšš€113.107€€Natural€Resourcesó óŠ & į Šą %" ą(a)If€part€of€the€principal€consists€of€a€right€to€receive€aŠ ļ Ŗ  Šroyalty,€overriding€or€limited€royalty,€working€interest,€delayŠ ø!s  Šrental,€or€other€interest€in€minerals€or€other€natural€resourcesŠ "<  Š(other€than€timber)€in,€on,€or€under€land,€the€proceeds€of€the€rightŠ J#  Šshall€be€allocated€to€principal€and€income€in€accordance€with€thisŠ $Ī  Šsection.Š Ü$— Šą %" ą(b)If€the€proceeds€are€received€as€rent€or€extension€paymentsŠ „%`  Šon€a€lease,€the€proceeds€are€income.Š ©d Šą %" ą(c)If€the€proceeds€are€received€from€a€production€payment,Š r- Šthe€proceeds€are€income€to€the€extent€of€any€factor€for€interest€orŠ ;ö Šits€equivalent€provided€in€the€governing€instrument,€and€theŠ æ Šbalance€of€the€proceeds€is€principal.Š Ķˆ Šą %" ą(d)If€the€proceeds€are€received€as€a€royalty,€overriding€orŠ – Q Šlimited€royalty,€or€bonus€or€from€a€working€interest,€net€profitŠ _  Šinterest,€or€any€other€interest€in€minerals€or€other€naturalŠ ( ć Šresources,€proceeds€not€provided€for€in€the€preceding€subsectionsŠ ń ¬  Šshall€be€apportioned€on€a€yearly€basis€in€accordance€with€thisŠ ŗ u  Šsubsection€whether€or€not€any€natural€resources€were€being€takenŠ ƒ >  Šfrom€the€land€at€the€time€the€property€was€placed€in€the€trust.€Š L  ŠTwenty„seven€and€one„half€percent€of€the€gross€proceeds,€but€notŠ Š  Što€exceed€50€percent€of€the€net,€after€deducting€the€expenses€andŠ Ž™  Šcarrying€charges€on€the€property,€is€principal,€and€the€balance€isŠ §b  Šincome.Š (p+   €€(Šņ ņSECTION€116.175.TIMBER.ó óŠ §b Šą  ą(a)To€the€extent€that€a€trustee€accounts€for€receipts€from€the€saleŠ p+ Šof€timber€and€related€products€pursuant€to€this€section,€the€trusteeŠ 9ō Šshall€allocate€the€net€receipts:Š ½ Šą  ąą r ą(1)to€income€to€the€extent€that€the€amount€of€timber€removedŠ Ė† Šfrom€the€land€does€not€exceed€the€rate€of€growth€of€the€timber€duringŠ ”O Šthe€accounting€periods€in€which€a€beneficiary€has€a€mandatoryŠ ] Šincome€interest;Š & į Šą  ąą r ą(2)to€principal€to€the€extent€that€the€amount€of€timberŠ ļ Ŗ Šremoved€from€the€land€exceeds€the€rate€of€growth€of€the€timber€or€theŠ ø!s Šnet€receipts€are€from€the€sale€of€standing€timber;Š "< Šą  ąą r ą(3)to€or€between€income€and€principal€if€the€net€receipts€areŠ J# Šfrom€the€lease€of€timberland€or€from€a€contract€to€cut€timber€fromŠ $Ī Šland€owned€by€a€trust,€by€determining€the€amount€of€timber€removedŠ Ü$— Šfrom€the€land€under€the€lease€or€contract€and€applying€the€rules€Ō_ŌinŠ „%`  ŠSubdivisions€(1)€and€(2);€orŠ ©d Šą  ąą r ą(4)to€principal€to€the€extent€that€advance€payments,€bonuses,Š r- Šand€other€payments€are€not€allocated€pursuant€to€Subdivision€(1),€(2),Š ;ö Šor€(3).Š æ Šą  ą(b)In€determining€net€receipts€to€be€allocated€pursuant€toŠ Ķˆ ŠSubsection€(a),€a€trustee€shall€deduct€and€transfer€to€principal€aŠ – Q Šreasonable€amount€for€depletion.Š _  Šą  ą(c)This€chapter€applies€whether€or€not€a€decedent€or€transferorŠ ( ć Šwas€harvesting€timber€from€the€property€before€it€became€subject€toŠ ń ¬  Šthe€trust.Š ŗ u  Šą  ą(d)If€a€trust€owns€an€interest€in€timberland€on€January€1,€2004,Š ƒ >  Šthe€trustee€may€allocate€a€net€receipt€from€the€sale€of€timber€andŠ L  Šrelated€products€in€the€manner€provided€by€this€chapter€or€in€anyŠ Š  Šlawful€manner€used€by€the€trustee€before€January€1,€2004,€to€makeŠ Ž™  Šthe€same€allocation.€€If€the€trust€acquires€an€interest€in€timberlandŠ §b  Šafter€January€1,€2004,€the€trustee€shall€allocate€net€receipts€from€theŠ p+  Šsale€of€timber€and€related€products€as€provided€in€this€chapter.Š  9ō  „„ŠThe€Texas€Trust€Code€merely€states€that€receiptsŠ §b Šfrom€timber€property€must€be€allocatedŠ p+ Šreasonably€and€equitably.€€The€Uniform€ActŠ 9ō Šprovides€much€more€detail,€but€provides€that€theŠ ½ Štrustee€can€continue€its€current€lawful€allocationŠ Ė† Šmethod€for€timber€property€owned€on€January€1,Š ”O Š2004.Š ] ŠŠ '©d „„'Šņ ņšš€113.108€€Timberó óŠ §b Šą %" ąIf€any€part€of€the€principal€consists€of€land€from€whichŠ p+ Šmerchantable€timber€may€be€removed,€the€proceeds€from€takingŠ 9ō Šthe€timber€from€the€land€shall€be€allocated€in€accordance€withŠ ½ ŠSubdivision€(3)€of€Subsection€(a)€of€Section€113.101€of€this€Act.Š Ė† ŠŠ (©d  €€(Šņ ņSECTION€116.176.PROPERTY€NOT€PRODUCTIVE€OFŠ –Q ŠINCOME.ó óŠ _ Šą  ą(a)If€a€marital€deduction€is€allowed€for€all€or€part€of€a€trust€whoseŠ (ć Šassets€consist€substantially€of€property€that€does€not€provide€theŠ ń¬ Šspouse€with€sufficient€income€from€or€use€of€the€trust€assets,€and€ifŠ ŗu Šthe€amounts€that€the€trustee€transfers€from€principal€to€income€underŠ ƒ> ŠSection€116.005€and€distributes€to€the€spouse€from€principalŠ L Špursuant€to€the€terms€of€the€trust€are€insufficient€to€provide€theŠ Š  Šspouse€with€the€beneficial€enjoyment€required€to€obtain€the€maritalŠ Ž™  Šdeduction,€the€spouse€may€require€the€trustee€to€make€propertyŠ §b  Šproductive€of€income,€convert€property€within€a€reasonable€time,€orŠ p+  Šexercise€the€power€conferred€by€Section€116.005(a).€€The€trustee€mayŠ 9ō  Šdecide€which€action€or€combination€of€actions€to€take.Š ½ Šą  ą(b)In€cases€not€governed€by€Subsection€(a),€proceeds€from€theŠ Ė† Šsale€or€other€disposition€of€an€asset€are€principal€without€regard€toŠ ”O Šthe€amount€of€income€the€asset€produces€during€any€accountingŠ ] Šperiod.Š  & į „„ŠSection€116.176€of€the€Uniform€Act€is€intendedŠ –Q Što€assure€that€a€trust€qualifies€for€the€maritalŠ _ Šdeduction.€€In€contrast,€ņ ņššó ó€113.110€of€the€TexasŠ (ć ŠTrust€Code€applies€to€unproductive€propertyŠ ń¬ Šgenerally.Š 'ŗu „„'Šņ ņšš€113.110€€Ō_ŌUnderproductiveŌ_Ō€Propertyó óŠ –Q Šą %" ą(a)Except€as€provided€by€Subsection€(b),€if€part€of€theŠ _ Šprincipal€consists€of€any€type€of€property€that€has€beenŠ (ć ŠŌ_ŌunderproductiveŌ_Ō€for€more€than€one€year€and€if€the€trustee€isŠ ń¬ Šrequired€to€sell€or€otherwise€dispose€of€the€property,€the€trusteeŠ ŗu Šshall€do€so€as€soon€as€possible,€and€if€the€sale€or€other€dispositionŠ ƒ> Šis€made€before€the€principal€is€finally€distributed,€to€the€extentŠ L Šthat€the€net€proceeds€from€the€sale€exceed€the€inventory€value€ofŠ Š Šthe€property,€the€income€beneficiary€or€the€beneficiary's€estate€isŠ Ž™  Šentitled€to€a€share€of€the€net€proceeds.€€The€beneficiary's€share€isŠ §b! Šan€amount€equal€to:Š p+" Šą %" ąą # ą(1)the€difference€between€the€net€proceeds€and€theŠ 9ō# Šamount€which,€if€invested€at€four€percent€a€year€simple€interestŠ ½$ Šduring€the€allocation€period,€would€have€produced€the€netŠ Ė†% Šproceeds,€lessŠ ”O& Šą %" ąą # ą(2)the€income€received€by€the€income€beneficiary€fromŠ ]' Šthe€trust€property€or€the€value€of€the€income€beneficiary's€use€ofŠ & į( Šthe€trust€property€during€the€allocation€period.Š ļ Ŗ) Šą %" ą(b)Property€is€Ō_ŌunderproductiveŌ_Ō€if€it€does€not€produce€anŠ ø!s* Šaverage€annual€net€income,€without€considering€depreciation€orŠ "<+ Šobsolescence,€equal€to€at€least€one€percent€of€its€value.Š J#, Šą %" ą(c)The€allocation€period€begins€one€year€after€the€propertyŠ $Ī- Šbecomes€Ō_ŌunderproductiveŌ_Ō€or€one€year€after€the€trustee€receives€theŠ Ü$—. Šproperty€if€it€was€Ō_ŌunderproductiveŌ_Ō€at€the€time€of€receipt.Š „%` / Šą %" ą(d)If€there€are€successive€income€beneficiaries,€the€incomeŠ ©d Šbeneficiaries'€share€of€the€net€proceeds€shall€be€divided€amongŠ r- Šthem€according€to€the€time€each€was€entitled€to€income.Š ;ö Šą %" ą(e)This€section€does€not€require€a€trustee€to€sell€or€dispose€ofŠ æ Šproperty.€€The€determination€as€to€whether€the€trustee€is€requiredŠ Ķˆ Što€sell€or€dispose€of€property€shall€be€made€in€accordance€withŠ – Q Šthe€requirements€set€out€in€the€governing€instruments,€otherŠ _  Šprovisions€of€this€code,€and€the€common€law.Š ( ć Šą %" ą(f)For€the€purposes€of€this€section:Š ń ¬  Šą %" ąą # ą(1)The€"value"€of€property€is:Š ŗ u  Šą %" ąą # ąą $ ą(A)inventory€value;Š ƒ >  Šą %" ąą # ąą $ ą(B)if€the€property€is€part€of€the€original€principal€andŠ L  Šdoes€not€have€an€inventory€value,€market€value;Š Š  Šą %" ąą # ąą $ ą(C)if€the€property€is€purchased€after€the€principal€isŠ Ž™  Šestablished€and€does€not€have€an€inventory€value,€its€cost;€orŠ §b  Šą %" ąą # ąą $ ą(D)if€the€property€is€acquired€through€foreclosure€ofŠ p+  Ša€mortgage€held€by€the€trust,€the€net€investment€in€the€propertyŠ 9ō  Šup€to€the€date€of€resale€by€the€trust,€and€not€the€bid€price€at€theŠ ½  Šforeclosure€sale.Š Ė† Šą %" ąą # ą(2)"Net€proceeds"€is€gross€proceeds€received€for€theŠ ”O Šproperty€less€the€sum€of€the€expenses€incurred€in€disposing€of€itŠ ] Šand€all€carrying€charges€that€were€charged€to€principal€which€itŠ &į Šwas€Ō_ŌunderproductiveŌ_Ō.Š ļŖ Šą %" ąą # ą(3)"Net€investment"€is€all€money€invested€and€advanced.Š (øs  €€(Šņ ņSECTION€116.177.DERIVATIVES€AND€OPTIONS.ó óŠ Š Šą  ą(a)In€this€section,€š šderivativešš€means€a€contract€or€financialŠ Ž™ Šinstrument€or€a€combination€of€contracts€and€financial€instrumentsŠ §b Šwhich€gives€a€trust€the€right€or€obligation€to€participate€in€some€orŠ p+ Šall€changes€in€the€price€of€a€tangible€or€intangible€asset€or€group€ofŠ 9ō Šassets,€or€changes€in€a€rate,€an€index€of€prices€or€rates,€or€other€marketŠ ½ Šindicator€for€an€asset€or€a€group€of€assets.Š Ė† Šą  ą(b)To€the€extent€that€a€trustee€does€not€account€under€SectionŠ ”O  Š116.153€for€transactions€in€derivatives,€the€trustee€shall€allocate€toŠ ]! Šprincipal€receipts€from€and€disbursements€made€in€connection€withŠ & į" Šthose€transactions.Š ļ Ŗ# Šą  ą(c)If€a€trustee€grants€an€option€to€buy€property€from€the€trust,Š ø!s$ Šwhether€or€not€the€trust€owns€the€property€when€the€option€isŠ "<% Šgranted,€grants€an€option€that€permits€another€person€to€sell€propertyŠ J#& Što€the€trust,€or€acquires€an€option€to€buy€property€for€the€trust€or€anŠ $Ī' Šoption€to€sell€an€asset€owned€by€the€trust,€and€the€trustee€or€otherŠ Ü$—( Šowner€of€the€asset€is€required€to€deliver€the€asset€if€the€option€isŠ „%` ) Šexercised,€an€amount€received€for€granting€the€option€must€beŠ ©d Šallocated€to€principal.€€An€amount€paid€to€acquire€the€option€must€beŠ r- Špaid€from€principal.€€A€gain€or€loss€realized€upon€the€exercise€of€Ō& [ ŌanŠ ;ö Šoption,€including€an€option€granted€to€a€Ō_ŌsettlorŌ_Ō€of€the€trust€forŠ æ Šservices€rendered,€must€be€allocated€to€principal.Ō'[;7ÄŌŠ  Ķˆ „„ŠThere€is€no€corresponding€Texas€statute.Š Š ŠŠ '©d „„'ŠŠ Š ŠŠ (©d  €€(Šņ ņSECTION€116.178.ASSET„BACKED€SECURITIES.ó óŠ * å Šą  ą(a)In€this€section,€š šasset„backed€securityšš€means€an€asset€whoseŠ ó ® Švalue€is€based€upon€the€right€it€gives€the€owner€to€receiveŠ ¼ w Šdistributions€from€the€proceeds€of€financial€assets€that€provideŠ … @ Šcollateral€for€the€security.€€The€term€includes€an€asset€that€gives€theŠ N  Šowner€the€right€to€receive€from€the€collateral€financial€assets€only€theŠ Ņ Šinterest€or€other€current€return€or€only€the€proceeds€other€thanŠ ą›  Šinterest€or€current€return.€€The€term€does€not€include€an€asset€toŠ ©d  Šwhich€Section€116.151€or€116.172€applies.Š r-  Šą  ą(b)If€a€trust€receives€a€payment€from€interest€or€other€currentŠ ;ö  Šreturn€and€from€other€proceeds€of€the€collateral€financial€assets,€theŠ æ  Štrustee€shall€allocate€to€income€the€portion€of€the€payment€which€theŠ Ķˆ  Špayer€identifies€as€being€from€interest€or€other€current€return€andŠ –Q Šshall€allocate€the€balance€of€the€payment€to€principal.Š _ Šą  ą(c)If€a€trust€receives€one€or€more€payments€in€exchange€for€theŠ (ć Štrustššs€entire€interest€in€an€asset„backed€security€in€one€accountingŠ ń¬ Šperiod,€the€trustee€shall€allocate€the€payments€to€principal.€€If€aŠ ŗu Špayment€is€one€of€a€series€of€payments€that€will€result€in€theŠ ƒ> Šliquidation€of€the€trustššs€interest€in€the€security€over€more€than€oneŠ L Šaccounting€period,€the€trustee€shall€allocate€10€percent€of€theŠ Š Špayment€to€income€and€the€balance€to€principal.Š  Ž™ „„ŠThere€is€no€corresponding€Texas€statute.Š '* å „„'ŠŠ (* å  €€(Šņ ņŌ_ŌSubchapterŌ_Ō€E.€€ą0 E ąAllocation€of€Disbursements€DuringŠ ;ö ŠAdministration€of€Trustó óŠ (æE=E= „„(ŠŠ ';ö „„'ŠŠ (;ö  €€(Šņ ņSECTION€116.201.DISBURSEMENTS€FROM€INCOME.ó óŠ a Šą  ąA€trustee€shall€make€the€following€disbursements€from€income€toŠ *å Šthe€extent€that€they€are€not€disbursements€to€which€SectionŠ ó® Š116.051(2)(B)€or€(C)€applies:Š ¼w  Šą  ąą r ą(1)one„half€of€the€regular€compensation€of€the€trustee€and€ofŠ … @! Šany€person€providing€investment€advisory€or€custodial€services€toŠ N! " Šthe€trustee;Š "Ņ# Šą  ąą r ą(2)one„half€of€all€expenses€for€accountings,€judicialŠ ą"›$ Šproceedings,€or€other€matters€that€involve€both€the€income€andŠ ©#d% Šremainder€interests;Š r$-& Šą  ąą r ą(3)all€of€the€other€ordinary€expenses€incurred€in€connectionŠ ;%ö' Šwith€the€administration,€management,€or€preservation€of€trustŠ ©d Šproperty€and€the€distribution€of€income,€including€interest,€ordinaryŠ r- Šrepairs,€regularly€recurring€taxes€assessed€against€principal,€andŠ ;ö Šexpenses€of€a€proceeding€or€other€matter€that€concerns€primarily€theŠ æ Šincome€interest;€andŠ Ķˆ Šą  ąą r ą(4)recurring€premiums€on€insurance€covering€the€loss€of€aŠ – Q Šprincipal€asset€or€the€loss€of€income€from€or€use€of€the€asset.Š  _  „„ŠThe€primary€difference€concerns€compensationŠ a Šof€trustees,€investment€advisors,€and€assetŠ *å  Šcustodians,€and€the€expenses€of€accounting,€andŠ ó®  Šother€judicial€proceedings.€€The€Uniform€ActŠ ¼w  Šallocates€these€equally€between€income€andŠ … @  Šprincipal.€€The€Texas€Trust€Code€allows€theŠ N!   Štrustee€to€use€its€discretion€to€allocate€suchŠ "Ņ Šcompensation€and€expenses€on€just€andŠ ą"› Šequitable€grounds.Š ©#d ŠŠ '©d „„'Šņ ņšš€113.111€€Charges€Against€Income€and€Principaló óŠ a Šą %" ą(a)The€following€charges€shall€be€made€against€income:Š *å Šą %" ąą # ą(1)ordinary€expenses€incurred€in€the€administration,Š ó® Šmanagement,€or€preservation€of€the€trust€property,€includingŠ ¼w Šregularly€recurring€taxes€assessed€against€any€portion€of€theŠ … @ Šprincipal,€water€rates,€premiums€on€insurance€on€the€interests€ofŠ N!  Šan€income€beneficiary,€Ō_ŌremaindermanŌ_Ō,€or€trustee,€interest€paid€byŠ "Ņ Šthe€trustee,€and€ordinary€repairs;Š ą"›  Šš8šŠ ©#d  Šą %" ąą # ą(3)court€costs€and€other€fees€on€periodic€judicialŠ r$-  Šaccountings,€unless€the€court€directs€otherwise;Š ;%ö  Šą %" ąą # ą(4)court€costs,€attorney's€fees,€and€other€fees€on€otherŠ ©d Šaccounting€or€judicial€proceedings€if€the€matter€primarilyŠ r- Šconcerns€the€income€interest,€unless€the€court€directs€otherwise;Š ;ö Šą %" ąą # ą(5)all€expenses€reasonably€incurred€by€the€trustee€forŠ æ Šcurrent€management€of€principal€and€application€of€income;Š Ķˆ Šą %" ąą # ą(6)the€portion€of€attorney's€fees€and€the€trustee'sŠ – Q Šcompensation€for€services€in€the€management€and€administrationŠ _  Šof€the€trust€estate,€irrespective€of€the€manner€of€computation,€andŠ ( ć Šfor€extraordinary€and€unusual€services,€including€remunerationŠ ń ¬  Šof€the€trustee€for€acceptance€of€the€trust,€distribution€of€the€trustŠ ŗ u  Šproperties,€termination€of€the€trust€estate,€and€all€other€fees€ofŠ ƒ >  Šsimilar€nature,€as€the€trustee€determines€in€its€discretion€to€be€justŠ L  Šand€equitable;Š Š  Šš8šą %" ąą # ąŠ Ž™  Šą %" ąą # ą(8)regularly€recurring€charges€payable€from€income€to€theŠ §b  Šsame€extent€and€in€the€same€manner€that€income€is€apportionedŠ p+  Šunder€Section€113.103.Š 9ō  Šą %" ą(c)If€charges€against€income€are€unusual€in€amount,€theŠ ½  Štrustee€may€by€use€of€reserves€or€other€reasonable€meansŠ Ė† Šapportion€the€charges€over€a€reasonable€period€of€time€andŠ ”O Šwithhold€from€distribution€sufficient€amounts€to€regularizeŠ ] Šdistributions.Š (&į  €€(Šņ ņSECTION€116.202.DISBURSEMENTS€FROM€PRINCIPAL.ó óŠ ƒ> Šą  ą(a)A€trustee€shall€make€the€following€disbursements€fromŠ L Šprincipal:Š Š Šą  ąą r ą(1)the€remaining€one„half€of€the€disbursements€described€inŠ Ž™ ŠSection€116.201(l)€and€(2);Š §b Šą  ąą r ą(2)all€of€the€trusteeššs€compensation€calculated€on€principalŠ p+ Šas€a€fee€for€acceptance,€distribution,€or€termination,€andŠ 9ō Šdisbursements€made€to€prepare€property€for€sale;Š ½ Šą  ąą r ą(3)payments€on€the€principal€of€a€trust€debt;Š Ė† Šą  ąą r ą(4)expenses€of€a€proceeding€that€concerns€primarilyŠ ”O  Šprincipal,€including€a€proceeding€to€construe€the€trust€or€to€protectŠ ]! Šthe€trust€or€its€property;Š & į" Šą  ąą r ą(5)premiums€paid€on€a€policy€of€insurance€not€described€inŠ ļ Ŗ# ŠSection€116.201(4)€of€which€the€trust€is€the€owner€and€beneficiary;Š ø!s$ Šą  ąą r ą(6)estate,€inheritance,€and€other€transfer€taxes,€includingŠ "<% Špenalties,€apportioned€to€the€trust;€andŠ J#& Šą  ąą r ą(7)disbursements€related€to€environmental€matters,€includingŠ $Ī' Šreclamation,€assessing€environmental€conditions,€remedying€andŠ Ü$—( Šremoving€environmental€contamination,€monitoring€remedialŠ „%` ) Šactivities€and€the€release€of€substances,€preventing€future€releases€ofŠ ©d Šsubstances,€collecting€amounts€from€persons€liable€or€potentiallyŠ r- Šliable€for€the€costs€of€those€activities,€penalties€imposed€underŠ ;ö Šenvironmental€laws€or€regulations€and€other€payments€made€toŠ æ Šcomply€with€those€laws€or€regulations,€statutory€or€common€lawŠ Ķˆ Šclaims€by€third€parties,€and€defending€claims€based€onŠ – Q Šenvironmental€matters.Š _  Šą  ą(b)If€a€principal€asset€is€encumbered€with€an€obligation€thatŠ ( ć Šrequires€income€from€that€asset€to€be€paid€directly€to€the€creditor,€theŠ ń ¬  Štrustee€shall€transfer€from€principal€to€income€an€amount€equal€to€theŠ ŗ u  Šincome€paid€to€the€creditor€in€reduction€of€the€principal€balance€ofŠ ƒ >  Šthe€obligation.Š  L  „„ŠThe€Uniform€Act€contains€two€provisions€thatŠ ƒ>  Šare€not€found€in€the€Texas€Code.€First,€theŠ L ŠUniform€Act€allocates€to€principal€all€trusteeŠ Š Šfees€related€to€the€acceptance,€distribution,€orŠ Ž™ Štermination€of€a€trust.€€Second,€the€Uniform€ActŠ §b Šallocates€to€principal€disbursement€related€toŠ p+