§ 37A-4-401. Character of receipts. - North Carolina Statutes

Article 4.

Allocation of ReceiptsDuring Administration of Trust.

Part 1. Receipts From Entities.

§ 37A‑4‑401. Character of receipts.

(a)        In this section,"entity" means a corporation, partnership, limited liability company,regulated investment company, real estate investment trust, common trust fund,or any other organization in which a trustee has an interest other than a trustor estate to which G.S. 37A‑4‑402 applies, a business or activityto which G.S. 37A‑4‑403 applies, or an asset‑backed security towhich G.S. 37A‑4‑415 applies.

(b)        Except as otherwiseprovided in this section, a trustee shall allocate to income money receivedfrom an entity.

(c)        A trustee shallallocate the following receipts from an entity to principal:

(1)        Property other thanmoney;

(2)        Money received inone distribution or a series of related distributions in exchange for part orall of a trust's interest in the entity;

(3)        Money received intotal or partial liquidation of the entity; and

(4)        Money received froman entity that is a regulated investment company or a real estate investmenttrust if the money distributed is a capital gain dividend for federal incometax purposes.

(d)        Money is receivedin partial liquidation:

(1)        To the extent thatthe entity, at or near the time of a distribution, indicates that it is adistribution in partial liquidation; or

(2)        If the total amountof money and property received in a distribution or series of relateddistributions is greater than twenty percent (20%) of the entity's grossassets, as shown by the entity's year‑end financial statementsimmediately preceding the initial receipt.

(e)        Money is notreceived in partial liquidation, nor may it be taken into account undersubdivision (2) of subsection (d) of this section, to the extent that it doesnot exceed the amount of income tax that a trustee or beneficiary shall pay ontaxable income of the entity that distributes the money.

(f)         A trustee may relyupon a statement made by an entity about the source or character of adistribution if the statement is made at or near the time of distribution bythe entity's board of directors or other person or group of persons authorizedto exercise powers to pay money or transfer property comparable to those of acorporation's board of directors. (2003‑232, s. 2.)