Allocation of Receipts

Utah Code tit. 75A, ch. 75A-5, pt. 75A-5-P4

in effect

Utah Code § 75A-5-401 Receipts from entity -- Character of receipts from entity.

75A-5-401. Receipts from entity -- Character of receipts from entity. (1) As used in this section: (a) "Capital distribution" means an entity distribution of money that is a: (i) return of capital; or (ii) distribution in total or partial liquidation of the entity. (b) (i) "Entity" means a corporation, partnership, limited liability company, regulated investment company, real estate investment trust, common trust fund, or any other organization or arrangement in which a fiduciary owns or holds an interest, regardless of whether the entity is a taxpayer for federal income tax purposes. (ii) "Entity" does not include: (A) a trust or estate to which Section 75A-5-402 applies; (B) a business or other activity to which Section 75A-5-403 applies that is not conducted by an entity described in Subsection (1)(b)(i); (C) an asset-backed security; or (D) an instrument or arrangement to which Section 75A-5-416 applies. (c) "Entity distribution" means a payment or transfer by an entity made to a person in the person's capacity as an owner or holder of an interest in the entity. (2) In this section, an attribute or action of an entity includes an attribute or action of any other entity in which the entity owns or holds an interest, including an interest owned or held indirectly through another entity. (3) Except as otherwise provided in Subsections (4)(b) through (d), a fiduciary shall allocate to income: (a) money received in an entity distribution; and (b) tangible personal property of nominal value received from the entity. (4) A fiduciary shall allocate to principal: (a) property received in an entity distribution that is not: (i) money; or (ii) tangible personal property of nominal value; (b) money received in an entity distribution in an exchange for part or all of the fiduciary's interest in the entity, to the extent the entity distribution reduces the fiduciary's interest in the entity relative to the interests of other persons that own or hold interests in the entity; (c) money received in an entity distribution that the fiduciary determines or estimates is a capital distribution; and (d) money received in an entity distribution from an entity that is: (i) a regulated investment company or real estate investment trust if the money received is a capital gain dividend for federal income tax purposes; or (ii) treated for federal income tax purposes in a comparable manner to the treatment described in Subsection (4)(d)(i). (5) A fiduciary may determine or estimate that money received in an entity distribution is a capital distribution: (a) by relying without inquiry or investigation on a characterization of the entity distribution provided by or on behalf of the entity, unless the fiduciary: (i) determines, on the basis of information known to the fiduciary, that the characterization is or may be incorrect; or (ii) owns or holds more than 50% of the voting interest in the entity; (b) by determining or estimating, on the basis of information known to the fiduciary or provided to the fiduciary by or on behalf of the entity, that the total amount of money and property received by the fiduciary in the entity distribution or a series of related entity distributions is or will be greater than 20% of the fair market value of the fiduciary's interest in the entity; or (c) if neither Subsection (5)(a) nor (b) applies, by considering the factors in Subsection (6) and the information known to the fiduciary or provided to the fiduciary by or on behalf of the entity. (6) In making a determination or estimate under Subsection (5)(c), a fiduciary may consider: (a) a characterization of an entity distribution provided by or on behalf of the entity; (b) the amount of money or property received in: (i) the entity distribution; or (ii) what the fiduciary determines is or will be a series of related entity distributions; (c) the amount described in Subsection (6)(b) compared to the amount that the fiduciary determines or estimates is, during the current or preceding accounting periods: (i) the entity's operating income; (ii) the proceeds of the entity's sale or other disposition of: (A) all or part of the business or other activity conducted by the entity; (B) one or more business assets that are not sold to customers in the ordinary course of the business or other activity conducted by the entity; or (C) one or more assets other than business assets, unless the entity's primary activity is to invest in assets to realize gain on the disposition of all or some of the assets; (iii) if the entity's primary activity is to invest in assets to realize gain on the disposition of all or some of the assets, the gain realized on the disposition; (iv) the entity's regular, periodic entity distributions; (v) the amount of money that the entity has accumulated; (vi) the amount of money that the entity has borrowed; (vii) the amount of money that the entity has received from the sources described in Sections 75A-5-407, 75A-5-410, 75A-5-411, and 75A-5-412; and (viii) the amount of money that the entity has received from a source not otherwise described in this subsection; and (d) any other factor the fiduciary determines is relevant. (7) If, after applying Subsections (3) through (6), a fiduciary determines that a part of an entity distribution is a capital distribution but the fiduciary is in doubt about the amount of the entity distribution that is a capital distribution, the fiduciary shall allocate to principal the amount of the entity distribution that is in doubt. (8) If a fiduciary receives additional information about the application of this section to an entity distribution before the fiduciary has paid part of the entity distribution to a beneficiary, the fiduciary may consider the additional information before making the payment to the beneficiary and may change a decision to make the payment to the beneficiary. (9) If a fiduciary receives additional information about the application of this section to an entity distribution after the fiduciary has paid part of the entity distribution to a beneficiary, the fiduciary is not required to change or recover the payment to the beneficiary but may consider that information in determining whether to exercise the power to adjust under Section 75A-5-203. Renumbered and Amended by Chapter 364, 2024 General Session

Utah Code § 75A-5-402 Receipts from entity -- Distribution from trust or estate.

75A-5-402. Receipts from entity -- Distribution from trust or estate. (1) A fiduciary shall allocate: (a) to income an amount received as a distribution of income, including a unitrust distribution under Part 3, Unitrust, from a trust or estate in which the fiduciary has an interest, other than an interest the fiduciary purchased in a trust that is an investment entity; and (b) to principal an amount received as a distribution of principal from the trust or estate. (2) If a fiduciary purchases, or receives from a settlor, an interest in a trust that is an investment entity, Section 75A-5-401, 75A-5-415, or 75A-5-416 applies to a receipt from the trust. Renumbered and Amended by Chapter 364, 2024 General Session

Utah Code § 75A-5-403 Receipts from entity -- Business or other activity conducted by fiduciary.

75A-5-403. Receipts from entity -- Business or other activity conducted by fiduciary. (1) This section applies to a business or other activity conducted by a fiduciary if the fiduciary determines that it is in the interests of the beneficiaries to account separately for the business or other activity instead of: (a) accounting for the business or other activity as part of the fiduciary's general accounting records; or (b) conducting the business or other activity through an entity described in Subsection 75A-5-401(1)(b)(i). (2) A fiduciary may account separately under this section for the transactions of a business or other activity, whether or not assets of the business or other activity are segregated from other assets held by the fiduciary. (3) A fiduciary that accounts separately under this section for a business or other activity: (a) may determine: (i) the extent to which the net cash receipts of the business or other activity shall be retained for: (A) working capital; (B) the acquisition or replacement of fixed assets; and (C) other reasonably foreseeable needs of the business or other activity; and (ii) the extent that the remaining net cash receipts are accounted for as principal or income in the fiduciary's general accounting records for the trust; (b) may make a determination under Subsection (3)(a) separately and differently from the fiduciary's decisions concerning distributions of income or principal; and (c) shall account for the net amount received from the sale of an asset of the business or other activity, other than a sale in the ordinary course of the business or other activity, as principal in the fiduciary's general accounting records for the trust, to the extent the fiduciary determines that the net amount received is no longer required in the conduct of the business or other activity. (4) A fiduciary may account separately under this section for activities that include: (a) retail, manufacturing, service, and other traditional business activities; (b) farming; (c) raising and selling livestock and other animals; (d) managing rental properties; (e) extracting minerals, water, and other natural resources; (f) growing and cutting timber; (g) an activity to which Section 75A-5-414, 75A-5-415, or 75A-5-416 applies; and (h) any other business conducted by the fiduciary. Renumbered and Amended by Chapter 364, 2024 General Session

Utah Code § 75A-5-404 Receipts not normally apportioned -- Principal receipts.

75A-5-404. Receipts not normally apportioned -- Principal receipts. A fiduciary shall allocate to principal: (1) to the extent not allocated to income under this chapter, an asset received from: (a) an individual during the individual's lifetime; (b) an estate; (c) a trust on termination of an income interest; or (d) a payor under a contract naming the fiduciary as beneficiary; (2) except as otherwise provided in this part, money or other property received from the sale, exchange, liquidation, or change in form of a principal asset; (3) an amount recovered from a third party to reimburse the fiduciary because of a disbursement described in Subsection 75A-5-502(1) or for another reason to the extent not based on loss of income; (4) proceeds of property taken by eminent domain, except that proceeds awarded for loss of income in an accounting period are income if a current income beneficiary had a mandatory income interest during the accounting period; (5) net income received in an accounting period during which there is no beneficiary to which a fiduciary is permitted or required to distribute income; and (6) other receipts as provided in Part 3, Unitrust. Renumbered and Amended by Chapter 364, 2024 General Session

Utah Code § 75A-5-405 Receipts not normally apportioned -- Rental property.

75A-5-405. Receipts not normally apportioned -- Rental property. (1) To the extent a fiduciary does not account for the management of rental property as a business under Section 75A-5-403, the fiduciary shall allocate to income an amount received as rent of real or personal property, including an amount received for cancellation or renewal of a lease. (2) An amount received as a refundable deposit, including a security deposit or a deposit that is to be applied as rent for future periods: (a) shall be added to principal and held subject to the terms of the lease, except as otherwise provided by law other than this chapter; and (b) is not allocated to income or available for distribution to a beneficiary until the fiduciary's contractual obligations have been satisfied with respect to that amount. Renumbered and Amended by Chapter 364, 2024 General Session

Utah Code § 75A-5-406 Receipts not normally apportioned -- Receipt on obligation to be paid in money.

75A-5-406. Receipts not normally apportioned -- Receipt on obligation to be paid in money. (1) This section does not apply to an obligation to which Section 75A-5-409, 75A-5-410, 75A-5-411, 75A-5-412, 75A-5-414, 75A-5-415, or 75A-5-416 applies. (2) A fiduciary shall allocate to income, without provision for amortization of premium, an amount received as interest on an obligation to pay money to the fiduciary, including an amount received as consideration for prepaying principal. (3) (a) A fiduciary shall allocate to principal an amount received from the sale, redemption, or other disposition of an obligation to pay money to the fiduciary. (b) A fiduciary shall allocate to income the increment in value of a bond or other obligation for the payment of money bearing no stated interest but payable or redeemable, at maturity or another future time, in an amount that exceeds the amount in consideration of which it was issued. Renumbered and Amended by Chapter 364, 2024 General Session

Utah Code § 75A-5-407 Receipts not normally apportioned -- Insurance policy or contract.

75A-5-407. Receipts not normally apportioned -- Insurance policy or contract. (1) This section does not apply to a contract to which Section 75A-5-409 applies. (2) (a) Except as otherwise provided in Subsection (3), a fiduciary shall allocate to principal the proceeds of a life insurance policy or other contract received by the fiduciary as beneficiary, including a contract that insures against damage to, destruction of, or loss of title to an asset. (b) The fiduciary shall allocate dividends on an insurance policy: (i) to income, to the extent premiums on the policy are paid from income; and (ii) to principal, to the extent premiums on the policy are paid from principal. (3) A fiduciary shall allocate to income proceeds of a contract that insures the fiduciary against loss of: (a) occupancy or other use by a current income beneficiary; (b) income; or (c) subject to Section 75A-5-403, profits from a business. Renumbered and Amended by Chapter 364, 2024 General Session

Utah Code § 75A-5-408 Receipts normally apportioned -- Insubstantial allocation not required.

75A-5-408. Receipts normally apportioned -- Insubstantial allocation not required. (1) If a fiduciary determines that an allocation between income and principal required by Section 75A-5-409, 75A-5-410, 75A-5-411, 75A-5-412, or 75A-5-415 is insubstantial, the fiduciary may allocate the entire amount to principal, unless Subsection 75A-5-203(5) applies to the allocation. (2) A fiduciary may presume an allocation is insubstantial under Subsection (1) if: (a) the amount of the allocation would increase or decrease net income in an accounting period, as determined before the allocation, by less than 10%; and (b) the asset producing the receipt to be allocated has a fair market value less than 10% of the total fair market value of the assets owned or held by the fiduciary at the beginning of the accounting period. (3) The power to make a determination under Subsection (1) may be: (a) exercised by a co-fiduciary in the manner described in Subsection 75A-5-203(6); or (b) released or delegated for a reason described in Subsection 75A-5-203(7) and in the manner described in Subsection 75A-5-203(8). Renumbered and Amended by Chapter 364, 2024 General Session

Utah Code § 75A-5-409 Receipts normally apportioned -- Deferred compensation, annuity, or similar payment.

75A-5-409. Receipts normally apportioned -- Deferred compensation, annuity, or similar payment. (1) As used in this section: (a) "Internal income of a separate fund" means the amount determined under Subsection (2). (b) "Marital trust" means a trust: (i) of which the settlor's surviving spouse is the only current income beneficiary and is entitled to a distribution of all the current net income of the trust; and (ii) that qualifies for a marital deduction with respect to the settlor's estate under Section 2056 of the Internal Revenue Code because: (A) an election to qualify for a marital deduction under Section 2056(b)(7) of the Internal Revenue Code has been made; or (B) the trust qualifies for a marital deduction under Section 2056(b)(5) of the Internal Revenue Code. (c) (i) "Payment" means an amount a fiduciary may receive over a fixed number of years or during the life of one or more individuals because of services rendered or property transferred to the payor in exchange for future amounts the fiduciary may receive. (ii) "Payment" includes an amount received in money or property from the payor's general assets or from a separate fund created by the payor. (d) "Separate fund" includes a private or commercial annuity, an individual retirement account, and a pension, profit-sharing, stock-bonus, or stock-ownership plan. (2) For each accounting period, and for each separate fund: (a) the fiduciary shall determine the internal income of the separate fund as if the separate fund were a trust subject to this chapter; (b) if the fiduciary cannot determine the internal income of the separate fund under Subsection (2)(a), the internal income of the separate fund is deemed to equal 3% of the value of the separate fund, according to the most recent statement of value preceding the beginning of the accounting period; and (c) if the fiduciary cannot determine the value of the separate fund under Subsection (2)(b), the value of the separate fund is deemed to equal the present value of the expected future payments, as determined under Section 7520 of the Internal Revenue Code, for the month preceding the beginning of the accounting period for which the computation is made. (3) A fiduciary shall allocate a payment received from a separate fund during an accounting period to income, to the extent of the internal income of the separate fund during the accounting period, and the balance to principal. (4) The fiduciary of a marital trust shall: (a) withdraw from a separate fund the amount the current income beneficiary of the trust requests the fiduciary to withdraw, not greater than the amount by which the internal income of the separate fund during the accounting period exceeds the amount the fiduciary otherwise receives from the separate fund during the accounting period; (b) transfer from principal to income the amount the current income beneficiary requests the fiduciary to transfer, not greater than the amount by which the internal income of the separate fund during the accounting period exceeds the amount the fiduciary receives from the separate fund during the accounting period after the application of Subsection (4)(a); and (c) distribute to the current income beneficiary as income: (i) the amount of the internal income of the separate fund received or withdrawn during the accounting period; and (ii) the amount transferred from principal to income under Subsection (4)(b). (5) For a trust, other than a marital trust, of which one or more current income beneficiaries are entitled to a distribution of all the current net income, the fiduciary shall transfer from principal to income the amount by which the internal income of a separate fund during the accounting period exceeds the amount the fiduciary receives from the separate fund during the accounting period. Renumbered and Amended by Chapter 364, 2024 General Session

Utah Code § 75A-5-410 Receipts normally apportioned -- Liquidating asset.

75A-5-410. Receipts normally apportioned -- Liquidating asset. (1) As used in this section: (a) "Liquidating asset" means an asset whose value will diminish or terminate because the asset is expected to produce receipts for a limited time. (b) "Liquidating asset" includes a leasehold, patent, copyright, royalty right, and right to receive payments during a period of more than one year under an arrangement that does not provide for the payment of interest on the unpaid balance. (2) This section does not apply to a receipt subject to Section 75A-5-401, 75A-5-409, 75A-5-411, 75A-5-412, 75A-5-414, 75A-5-415, 75A-5-416, or 75A-5-503. (3) A fiduciary shall allocate: (a) to income: (i) a receipt produced by a liquidating asset, to the extent the receipt does not exceed 3% of the value of the asset; or (ii) if the fiduciary cannot determine the value of the asset, 10% of the receipt; and (b) to principal, the balance of the receipt. Renumbered and Amended by Chapter 364, 2024 General Session

Utah Code § 75A-5-411 Receipts normally apportioned -- Minerals, water, and other natural resources.

75A-5-411. Receipts normally apportioned -- Minerals, water, and other natural resources. (1) To the extent that a fiduciary does not account for a receipt from an interest in minerals, water, or other natural resources as a business under Section 75A-5-403, the fiduciary shall allocate the receipt: (a) to income, to the extent received: (i) as delay rental or annual rent on a lease; (ii) as a factor for interest or the equivalent of interest under an agreement creating a production payment; or (iii) on account of an interest in renewable water; (b) to principal, if received from a production payment, to the extent that Subsection (1)(a)(ii) does not apply; or (c) between income and principal equitably, to the extent received: (i) on account of an interest in nonrenewable water; (ii) as a royalty, shut-in-well payment, take-or-pay payment, or bonus; or (iii) from a working interest or any other interest not provided for in Subsection (1)(a) or (b) or Subsection (1)(c)(i) or (ii). (2) This section applies to an interest owned or held by a fiduciary regardless of whether a settlor was extracting minerals, water, or other natural resources before the fiduciary owned or held the interest. (3) An allocation of a receipt under Subsection (1)(c) is presumed to be equitable if the amount allocated to principal is equal to the amount allowed by the Internal Revenue Code as a deduction for depletion of the interest. (4) (a) If a fiduciary owns or holds an interest in minerals, water, or other natural resources before July 1, 2020, the fiduciary may allocate receipts from the interest as provided in this section or in the manner used by the fiduciary before July 1, 2020. (b) If the fiduciary acquires an interest in minerals, water, or other natural resources on or after July 1, 2020, the fiduciary shall allocate receipts from the interest as provided in this section. Renumbered and Amended by Chapter 364, 2024 General Session

Utah Code § 75A-5-412 Receipts normally apportioned -- Timber.

75A-5-412. Receipts normally apportioned -- Timber. (1) To the extent that a fiduciary does not account for receipts from the sale of timber and related products as a business under Section 75A-5-403, the fiduciary shall allocate the net receipts: (a) to income, to the extent that the amount of timber cut from the land does not exceed the rate of growth of the timber; (b) to principal, to the extent that the amount of timber cut from the land exceeds the rate of growth of the timber or the net receipts are from the sale of standing timber; (c) between income and principal if the net receipts are from the lease of land used for growing and cutting timber or from a contract to cut timber from land, by determining the amount of timber cut from the land under the lease or contract and applying the rules in Subsections (1)(a) and (b); or (d) to principal, to the extent that advance payments, bonuses, and other payments are not allocated under Subsection (1)(a), (b), or (c). (2) In determining net receipts to be allocated under Subsection (1), a fiduciary shall deduct and transfer to principal a reasonable amount for depletion. (3) This section applies to land owned or held by a fiduciary regardless of whether a settlor was cutting timber from the land before the fiduciary owned or held the property. (4) (a) If a fiduciary owns or holds an interest in land used for growing and cutting timber before July 1, 2020, the fiduciary may allocate net receipts from the sale of timber and related products as provided in this section or in the manner used by the fiduciary before July 1, 2020. (b) If the fiduciary acquires an interest in land used for growing and cutting timber on or after July 1, 2020, the fiduciary shall allocate net receipts from the sale of timber and related products as provided in this section. Renumbered and Amended by Chapter 364, 2024 General Session

Utah Code § 75A-5-413 Receipts normally apportioned -- Marital deduction property not productive of income.

75A-5-413. Receipts normally apportioned -- Marital deduction property not productive of income. (1) If a trust received property for which a gift or estate tax marital deduction was allowed and the settlor's spouse holds a mandatory income interest in the trust, the spouse may require the trustee, to the extent the trust assets otherwise do not provide the spouse with sufficient income from or use of the trust assets to qualify for the deduction, to: (a) make property productive of income; (b) convert property to property productive of income within a reasonable time; or (c) exercise the power to adjust under Section 75A-5-203. (2) The trustee may decide which action or combination of actions in Subsection (1) to take. Renumbered and Amended by Chapter 364, 2024 General Session

Utah Code § 75A-5-414 Receipts normally apportioned -- Derivative or option.

75A-5-414. Receipts normally apportioned -- Derivative or option. (1) As used in this section: (a) "Derivative" means a contract, instrument, other arrangement, or combination of contracts, instruments, or other arrangements, for which the value, rights, and obligations are, in whole or in part, dependent on or derived from an underlying tangible or intangible asset, group of tangible or intangible assets, index, or occurrence of an event. (b) "Derivative" includes stocks, fixed income securities, and financial instruments and arrangements based on indices, commodities, interest rates, weather-related events, and credit-default events. (2) To the extent that a fiduciary does not account for a transaction in derivatives as a business under Section 75A-5-403, the fiduciary shall allocate: (a) 10% of receipts from the transaction and 10% of disbursements made in connection with the transaction to income; and (b) the balance to principal. (3) Subsection (4) applies if: (a) a fiduciary: (i) grants an option to buy property from a trust, regardless of whether the trust owns the property when the option is granted; (ii) grants an option that permits another person to sell property to the trust; or (iii) acquires an option to buy property for the trust or an option to sell an asset owned by the trust; and (b) the fiduciary or other owner of the asset is required to deliver the asset if the option is exercised. (4) If this subsection applies, the fiduciary shall allocate 10% to income and the balance to principal of the following amounts: (a) an amount received for granting the option; (b) an amount paid to acquire the option; and (c) gain or loss realized on the exercise, exchange, settlement, offset, closing, or expiration of the option. Renumbered and Amended by Chapter 364, 2024 General Session

Utah Code § 75A-5-415 Receipts normally apportioned -- Asset-backed security.

75A-5-415. Receipts normally apportioned -- Asset-backed security. (1) Except as otherwise provided in Subsection (2), a fiduciary shall allocate: (a) to income, a receipt from or related to an asset-backed security, to the extent that the payor identifies the payment as being from interest or other current return; and (b) to principal, the balance of the receipt. (2) If a fiduciary receives one or more payments in exchange for part or all of the fiduciary's interest in an asset-backed security, including a liquidation or redemption of the fiduciary's interest in the security, the fiduciary shall allocate: (a) to income, 10% of receipts from the transaction and 10% of disbursements made in connection with the transaction; and (b) to principal, the balance of the receipts and disbursements. Renumbered and Amended by Chapter 364, 2024 General Session

Utah Code § 75A-5-416 Receipts normally apportioned -- Other financial instrument or arrangement.

75A-5-416. Receipts normally apportioned -- Other financial instrument or arrangement. (1) A fiduciary shall allocate receipts from or related to a financial instrument or arrangement not otherwise addressed by this chapter. (2) The allocation must be consistent with Sections 75A-5-414 and 75A-5-415. Renumbered and Amended by Chapter 364, 2024 General Session

Source: Utah Office of Legislative Research and General Counsel (le.utah.gov)URL: https://le.utah.gov/xcode/Title75A/Chapter5/75A-5-P4.html?v=C75A-5-P4_2024090120240501Fetched: 10/26/2026