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 proportionately:

   1. 1. From income to the extent that receipts from the entity are allocated to income; and

   2. 2. From principal to the extent that:

      1. a. receipts from the entity are allocated to principal, and
      2. b. the trust's share of the entity's taxable income exceeds the total receipts described in paragraph 1 and subparagraph a of paragraph 2 of this section.
4. D. For purposes of this section, receipts allocated to principal or income must be reduced by the amount distributed to a beneficiary from principal or income for which the trust receives a deduction in calculating the tax.

Added by Laws 1998, SB 1291, c. 115, § 29, eff. November 1, 1998.