SB384: Bill Text

SB384,150,19 701.1115 (1) In this subsection 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 trust or estate to which sub. (11) s. 701.1116 applies, a business or activity to which sub. (12) s. 701.1117 applies, or an asset-backed security to which sub. (24) s. 701.1129 applies.

SB384,150,21 (2) Except as otherwise provided in this subsection section, a trustee shall allocate to income money received from an entity.

SB384,150,25 (5) Money is not received in partial liquidation, nor may it be taken into account under par. (d) 2. sub. (4) (b), to the extent that it does not exceed the amount of income tax that a trustee or beneficiary must pay on taxable income of the entity that distributes the money.

SB384,257 Section 257. 701.20 (11) of the statutes is renumbered 701.1116 and amended to read:

SB384,151,9 701.1116 Distribution from trust or estate. A trustee shall allocate to income an amount received as a distribution of income from a trust or an estate in which the trust has an interest other than a purchased interest, and shall allocate to principal an amount received as a distribution of principal from such a trust or estate. If a trustee purchases an interest in a trust that is an investment entity, or a decedent or donor transfers an interest in such a trust to a trustee, sub. (10) s. 701.1115 or (24) 701.1129 applies to a receipt from the trust.

SB384,258 Section 258. 701.20 (12) of the statutes is renumbered 701.1117 and 701.1117 (3) (g), as renumbered, is amended to read:

SB384,151,12 701.1117 (3) (g) Activities to which sub. (23) s. 701.1128 applies.

SB384,259 Section 259. 701.20 (13) of the statutes is renumbered 701.1118, and 701.1118 (1), (2), (3) and (6), as renumbered, are amended to read:

SB384,151,18 701.1118 (1) To the extent not allocated to income under this section subchapter, assets received from a transferor during the transferor's lifetime, a decedent's estate, a trust with a terminating income interest, or a payer under a contract naming the trust or its trustee as beneficiary.

SB384,151,21 (2) Money or other property received from the sale, exchange, liquidation, or change in form of a principal asset, including realized profit, subject to subs. (10) ss. 701.1115 to (24) 701.1129.

SB384,151,24 (3) Amounts recovered from 3rd parties to reimburse the trust because of disbursements described in sub. (26) (a) 7. s. 701.1131 (1) (g) or for other reasons to the extent not based on the loss of income.

SB384,151,25 (6) Other receipts as provided in subs. (17) ss. 701.1122 to (24) 701.1129.

SB384,260 Section 260. 701.20 (14) of the statutes is renumbered 701.1119 and amended to read:

SB384,152,10 701.1119 Rental property. To the extent that a trustee accounts for receipts from rental property in accordance with this subsection section, the trustee 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. An amount received as a refundable deposit, including a security deposit or a deposit that is to be applied as rent for future periods, must be added to principal and held subject to the terms of the lease and is not available for distribution to a beneficiary until the trustee's contractual obligations have been satisfied with respect to that amount.

SB384,261 Section 261. 701.20 (15) of the statutes is renumbered 701.1120, and 701.1120 (3), as renumbered, is amended to read:

SB384,152,15 701.1120 (3) This subsection section does not apply to an obligation to which sub. (18), (19), (20), (21), (23) s. 701.1123, 701.1124, 701.1125, 701.1126, 701.1128, or (24) 701.1129 applies.

SB384,262 Section 262. 701.20 (16) of the statutes is renumbered 701.1121 and amended to read:

SB384,152,24 701.1121 Insurance policies and similar contracts. (1) Except as provided in par. (b) sub. (2), a trustee shall allocate to principal the proceeds of a life insurance policy or other contract in which the trust or its trustee is named as beneficiary, including a contract that insures the trust or its trustee against loss for damage to, destruction of, or loss of title to, a trust asset. The trustee shall allocate dividends on an insurance policy to income if the premiums on the policy are paid from income, and to principal if the premiums are paid from principal.

SB384,153,3 (2) A trustee shall allocate to income proceeds of a contract that insures the trustee against loss of occupancy or other use by an income beneficiary, loss of income, or, subject to sub. (12) s. 701.1117, loss of profits from a business.

SB384,153,5 (3) This subsection section does not apply to a contract to which sub. (18) s. 701.1123 applies.

SB384,263 Section 263. 701.20 (17) of the statutes is renumbered 701.1122, and 701.1122 (intro.), as renumbered, is amended to read:

SB384,153,16 701.1122 Insubstantial allocations not required. (intro.) If a trustee determines that an allocation between principal and income required by sub. (15) (b), (18), (19), (20), (21) s. 701.1120 (2), 701.1123, 701.1124, 701.1125, 701.1126, or (24) 701.1129 is insubstantial, the trustee may allocate the entire amount to principal unless one of the circumstances described in sub. (4) (c) s. 701.1104 (3) applies to the allocation. This power may be exercised by a cotrustee in the circumstances described in sub. (4) (d) s. 701.1104 (4) and may be released for the reasons and in the manner described in sub. (4) (e) s. 701.1104 (5). An allocation is presumed to be insubstantial if:

SB384,264 Section 264. 701.20 (18) (title) of the statutes is renumbered 701.1123 (title).

SB384,265 Section 265. 701.20 (18) (a) of the statutes is repealed.

SB384,266 Section 266. 701.20 (18) (b) of the statutes is renumbered 701.1123 (2) and amended to read:

SB384,154,2 701.1123 (2) To the extent that a payment is characterized as interest or, a dividend, or a payment made in lieu of interest or a dividend, a trustee shall allocate it the payment to income. The trustee shall allocate to principal the balance of the payment and any other payment received in the same accounting period that is not characterized as interest, a dividend, or an equivalent a payment in lieu of interest or a dividend.

SB384,267 Section 267. 701.20 (18) (c) 1. of the statutes is renumbered 701.1123 (1) (d) and amended to read:

SB384,154,6 701.1123 (1) (d) In this paragraph "plan "Plan income" means any of the following:

SB384,154,17 1. With respect to payments received from a plan that maintains separate accounts or funds for its participants or account holders, such as defined contribution retirement plans, individual retirement accounts, Roth individual retirement accounts, and some types of deferred compensation plans, either the amount of the plan separate account or fund held for the benefit of the trust that, if the plan separate account or fund were a trust, would be allocated to income under pars. (b) and (d) for that accounting period, or 4 percent of the value of the plan account or fund on the first day of the accounting period. The trustee shall, in his or her discretion, choose the method of determining "plan income" under this subd. 1. a. subdivision, and may change the method of determining "plan income" under this subd. 1. a. subdivision for any subsequent accounting period.

SB384,154,23 2. With respect to payments received from a plan that does not maintain separate accounts or funds for its participants or account holders, such as defined benefit retirement plans and some types of deferred compensation plans, 4 percent of the total present value of the trust's interest in the plan as of the first day of the accounting period, based on reasonable actuarial assumptions as determined by the trustee.

SB384,268 Section 268. 701.20 (18) (c) 2. of the statutes is renumbered 701.1123 (3) and amended to read:

SB384,155,7 701.1123 (3) For each accounting period of a trust in which the trust receives a payment but no part of any payment is allocated to income under par. (b) sub. (2), the trustee shall allocate to income that portion of the aggregate value of all payments received by the trustee in that accounting period that is equal to the amount of plan income that is attributable to the trust's interest in the plan from which payment is received for that accounting period. The trustee shall allocate the balance of any payments to principal.

SB384,269 Section 269. 701.20 (18) (d) of the statutes is renumbered 701.1123 (5) and amended to read:

SB384,155,13 701.1123 (5) If, to obtain an estate or gift tax marital deduction for an interest in a trust, a trustee must allocate more of a payment to income than provided for by this subsection section, the trustee shall allocate to income the additional amount necessary to obtain the marital deduction.

SB384,270 Section 270. 701.20 (18) (e) of the statutes is renumbered 701.1123 (6) and amended to read:

SB384,155,17 701.1123 (6) This subsection section does not apply to payments a payment to which sub. (19) s. 701.1124 applies.

SB384,271 Section 271. 701.20 (19) of the statutes is renumbered 701.1124, and 701.1124 (1), as renumbered, is amended to read:

SB384,156,4 701.1124 (1) In this subsection section, "liquidating asset" means an asset whose value will diminish or terminate because the asset is expected to produce receipts for a period of limited duration. The term 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. The term does not include a payment subject to sub. (18) s. 701.1123, resources subject to sub. (20) s. 701.1125, timber subject to sub. (21) s. 701.1126, an activity subject to sub. (23) s. 701.1128, an asset subject to sub. (24) s. 701.1129, or any asset for which the trustee establishes a reserve for depreciation under sub. (27) s. 701.1132.

SB384,272 Section 272. 701.20 (20) of the statutes is renumbered 701.1125, and 701.1125 (1) (intro.) and (d), (3) and (4), as renumbered, are amended to read:

SB384,156,9 701.1125 (1) (intro.) To the extent that a trustee accounts for receipts from an interest in minerals or other natural resources in accordance with this subsection section, the trustee shall allocate them as follows:

SB384,156,12 (d) If an amount is received from a working interest or any other interest not provided for in subd. 1., 2. par. (a), (b), or 3. (c), 90 percent of the net amount received must be allocated to principal and the balance to income.

SB384,156,15 (3) This subsection section applies whether or not a decedent or donor was extracting minerals, water, or other natural resources before the interest became subject to the trust.

SB384,156,21 (4) If a trust owns an interest in minerals, water, or other natural resources on May 17, 2005, the trustee may allocate receipts from the interest as provided in this subsection section or in the manner used by the trustee before May 17, 2005. If the trust acquires an interest in minerals, water, or other natural resources after May 17, 2005, the trustee shall allocate receipts from the interest as provided in this subsection section.

SB384,273 Section 273. 701.20 (21) (title) of the statutes is repealed.

SB384,274 Section 274. 701.20 (21) of the statutes is renumbered 701.1126, and 701.1126 (1) (intro.), (c) and (d), (2), (3) and (4), as renumbered, are amended to read:

SB384,157,3 701.1126 (1) (intro.) To the extent that a trustee accounts for receipts from the sale of timber and related products in accordance with this subsection section, the trustee shall allocate the net receipts:

SB384,157,7 (c) To income or principal or between income and principal if the net receipts are from the lease of timberland or from a contract to cut timber from land owned by a trust, by determining the amount of timber removed from the land under the lease or contract and applying the rules in subds. 1. pars. (a) and 2. (b).

SB384,157,9 (d) To principal to the extent that advance payments, bonuses, and other payments are not allocated under subd. 1., 2. par. (a), (b), or 3. (c).

SB384,157,11 (2) In determining net receipts to be allocated under par. (a) sub. (1), a trustee shall deduct and transfer to principal a reasonable amount for depletion.

SB384,157,13 (3) This subsection section applies whether or not a decedent or transferor was harvesting timber from the property before it became subject to the trust.

SB384,157,19 (4) If a trust owns an interest in timberland on May 17, 2005, the trustee may allocate net receipts from the sale of timber and related products as provided in this subsection section or in the manner used by the trustee before May 17, 2005. If the trust acquires an interest in timberland after May 17, 2005, the trustee shall allocate net receipts from the sale of timber and related products as provided in this subsection section.

SB384,275 Section 275. 701.20 (22) of the statutes is renumbered 701.1127 and amended to read:

SB384,158,6 701.1127 Property not productive of income. (1) If a marital deduction is allowed for all or part of a trust whose assets consist substantially of property that does not provide the surviving spouse with sufficient income from or use of the trust assets, and if the amounts that the trustee transfers from principal to income under sub. (4) s. 701.1104 and distributes to the spouse from principal in accordance with the terms of the trust are insufficient to provide the spouse with the beneficial enjoyment required to obtain the marital deduction, the spouse may require the trustee to make property productive of income, convert property within a reasonable time, or exercise the power conferred by sub. (4) (a) s. 701.1104 (1). The trustee may decide which action or combination of actions to take.

SB384,158,9 (2) In cases not governed by par. (a) sub. (1), proceeds from the sale or other disposition of an asset are principal without regard to the amount of income the asset produces during any accounting period.

SB384,276 Section 276. 701.20 (23) of the statutes is renumbered 701.1128, and 701.1128 (1) and (2), as renumbered, are amended to read:

SB384,158,16 701.1128 (1) In this subsection section, "derivative" means a contract or financial instrument or a combination of contracts and financial instruments that gives a trust the right or obligation to participate in some or all changes in the price of a tangible or intangible asset or group of assets, or changes in a rate, an index of prices or rates, or another market indicator for an asset or a group of assets.

SB384,158,19 (2) To the extent that a trustee does not account under sub. (12) s. 701.1117 for transactions in derivatives, the trustee shall allocate to principal receipts from and disbursements made in connection with those transactions.

SB384,277 Section 277. 701.20 (24) of the statutes is renumbered 701.1129, and 701.1129 (1), as renumbered, is amended to read:

SB384,159,3 701.1129 (1) In this subsection section, "asset-backed security" means an asset whose value is based upon the right it gives the owner to receive distributions from the proceeds of financial assets that provide collateral for the security. The term includes an asset that gives the owner the right to receive from the collateral financial assets only the interest or other current return or only the proceeds other than interest or current return. The term does not include an asset to which sub. (10) s. 701.1115 or (18) 701.1123 applies.

SB384,278 Section 278. 701.20 (25) of the statutes is renumbered 701.1130, and 701.1130 (intro.), as renumbered, are amended to read:

SB384,159,8 701.1130 Disbursements from income. (intro.) A trustee shall make the following disbursements from income to the extent that they are not disbursements specified in sub. (5) (b) 2. s. 701.1110 (2) (b) or 3. (c):

SB384,279 Section 279. 701.20 (26) of the statutes is renumbered 701.1131, and 701.1131 (1) (a), (e) and (g), as renumbered, are amended to read:

SB384,159,12 701.1131 (1) (a) The remaining one-half of the disbursements described in sub. (25) (a) s. 701.1130 (1) and (b) (2).

SB384,159,14 (e) Premiums paid on a policy of insurance not described in sub. (25) (d) s. 701.1130 (4) of which the trust is the owner and beneficiary.

SB384,159,22 (g) Disbursements related to environmental matters, including reclamation, assessing environmental conditions, remedying and removing environmental contamination, monitoring remedial activities and the release of substances, preventing future releases of substances, collecting amounts from persons liable or potentially liable for the costs of those activities, penalties imposed under environmental laws or regulations law and other payments made to comply with those laws or regulations environmental law, statutory or common law claims by 3rd parties, and defending claims based on environmental matters.

SB384,280 Section 280. 701.20 (27) of the statutes is renumbered 701.1132, and 701.1132 (1) and (2) (c), as renumbered, are amended to read:

SB384,160,3 701.1132 (1) In this subsection section, "depreciation" means a reduction in value due to wear, tear, decay, corrosion, or gradual obsolescence of a fixed asset having a useful life of more than one year.

SB384,160,5 (2) (c) Under this subsection section if the trustee is accounting under sub. (12) s. 701.1117 for the business or activity in which the asset is used.

SB384,281 Section 281. 701.20 (28) of the statutes is renumbered 701.1133, and 701.1133 (1), (2) (intro.) and (e) and (3), as renumbered, are amended to read:

SB384,160,11 701.1133 (1) If a trustee makes or expects to make a principal disbursement described in this subsection section, the trustee may transfer an appropriate amount from income to principal in one or more accounting periods to reimburse principal or to provide a reserve for future principal disbursements.

SB384,160,14 (2) (intro.) Principal disbursements to which par. (a) sub. (1) applies include the following, but only to the extent that the trustee has not been and does not expect to be reimbursed by a 3rd party:

SB384,160,15 (e) Disbursements described in sub. (26) (a) 7. s. 701.1131 (1) (g).

SB384,160,18 (3) If the asset whose ownership gives rise to the disbursements becomes subject to a successive income interest after an income interest ends, a trustee may continue to transfer amounts from income to principal as provided in par. (a) sub. (1).

SB384,282 Section 282. 701.20 (29) (title) of the statutes is renumbered 701.1134 (title).

SB384,283 Section 283. 701.20 (29) (a) of the statutes is renumbered 701.1134 (1).

SB384,284 Section 284. 701.20 (29) (b) of the statutes is renumbered 701.1134 (2).

SB384,285 Section 285. 701.20 (29) (c) (intro.) of the statutes is renumbered 701.1134 (3) (intro.) and amended to read:

SB384,160,25 701.1134 (3) (intro.) A tax required to be paid by a trustee on the trust's share of an entity's taxable income must be paid proportionately as follows:

SB384,286 Section 286. 701.20 (29) (c) 1. of the statutes is renumbered 701.1134 (3) (a) and amended to read:

SB384,161,4 701.1134 (3) (a) From income to the extent that receipts from the entity are allocated only to income.

SB384,287 Section 287. 701.20 (29) (c) 2. (intro.) and a. of the statutes are consolidated, renumbered 701.1134 (3) (b) and amended to read:

SB384,161,8 701.1134 (3) (b) From principal to the extent that : 2. a. Receipts receipts from the entity are allocated only to principal.

SB384,288 Section 288. 701.20 (29) (c) 2. b. of the statutes is repealed.

SB384,289 Section 289. 701.20 (29) (d) of the statutes is repealed.

SB384,290 Section 290. 701.20 (30) of the statutes is renumbered 701.1135, and 701.1135 (1) (a), as renumbered, is amended to read:

SB384,161,14 701.1135 (1) (a) Elections and decisions, other than those described in par. (b) sub. (2), that the fiduciary makes from time to time regarding tax matters.

SB384,291 Section 291. 701.20 (31) of the statutes is repealed.

SB384,292 Section 292. 701.21 of the statutes is renumbered 701.1136, and 701.1136 (1), (2) and (4), as renumbered, are amended to read:

SB384,161,22 701.1136 (1) Distribution of income. Except as otherwise determined by the trustee or a court under s. 701.20 (4g) 701.1106 with respect to unitrust distributions, if a beneficiary is entitled to receive income from a trust, but the creating trust instrument fails to specify how frequently it is to be paid, the trustee shall distribute at least annually the income to which such beneficiary is entitled.