701.1132701.1132 Transfers from income to principal for depreciation.

701.1132(1)(1) In this 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.

701.1132(2)(2) A trustee may transfer to principal a reasonable amount of the net cash receipts from a principal asset that is subject to depreciation, but may not transfer any amount for depreciation:

701.1132(2)(a)(a) Of that portion of real property used or available for use by a beneficiary as a residence or of tangible personal property held or made available for the personal use or enjoyment of a beneficiary.

701.1132(2)(b)(b) During the administration of a decedent’s estate.

701.1132(2)(c)(c) Under this section if the trustee is accounting under s. 701.1117 for the business or activity in which the asset is used.

701.1132(3)(3) An amount transferred to principal need not be held as a separate fund.

701.1133701.1133 Transfers from income to reimburse principal.

701.1133(1)(1) If a trustee makes or expects to make a principal disbursement described in this 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.

701.1133(2)(2) Principal disbursements to which 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:

701.1133(2)(a)(a) An amount chargeable to income but paid from principal because it is unusually large, including extraordinary repairs.

701.1133(2)(b)(b) A capital improvement to a principal asset, whether in the form of changes to an existing asset or the construction of a new asset, including special assessments.

701.1133(2)(c)(c) Disbursements made to prepare property for rental, including tenant allowances, leasehold improvements, and brokers’ commissions.

701.1133(2)(d)(d) Periodic payments on an obligation secured by a principal asset to the extent that the amount transferred from income to principal for depreciation is less than the periodic payments.

701.1133(2)(e)(e) Disbursements described in s. 701.1131 (1) (g).

701.1133(3)(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 sub. (1).

701.1134(1)(1) A tax required to be paid by a trustee based on receipts allocated to income must be paid from income.

701.1134(2)(2) 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.

701.1134(3)(3) A tax required to be paid by a trustee on the trust’s share of an entity’s taxable income must be paid as follows:

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

701.1134(3)(b)(b) From principal to the extent that receipts from the entity are allocated only to principal.

701.1134(3)(c)(c) Proportionately from principal and income to the extent that receipts from the entity are allocated to both income and principal.

701.1134(3)(d)(d) From principal to the extent that the tax exceeds the total receipts from the entity.

701.1134(4)(4) After applying subs. (1) to (3), 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.

701.1135701.1135 Adjustments between principal and income because of taxes.