1. A. A tax required to be paid by a trustee based on receipts allocated to income must be paid from income.
2. B. A tax required to be paid by a trustee based on receipts allocated to principal must be paid from principal, even if the tax is called an income tax by the taxing authority.

3. C. A tax required to be paid by a trustee on the trust's share of an entity's taxable income must be paid:

   1. 1. From income to the extent that receipts from the entity are allocated only to income;
   2. 2. From principal to the extent that receipts from the entity are allocated only to principal;
   3. 3. Proportionately from principal and income to the extent that receipts from the entity are allocated to both income and principal; and
   4. 4. From principal to the extent that the tax exceeds the total receipts from the entity .
4. D. After applying subsections A through C of this section, the trustee shall adjust income or principal receipts to the extent that the trust’s taxes are reduced because the trust receives a deduction for payments made to a beneficiary.

Laws 1998, SB 1291, c. 115, § 29, eff. November 1, 1998; Amended by Laws 2009, SB 981, c. 90, § 2, eff. November 1, 2009 (superseded document available).