§2149. Corporate distributions

A. Corporate distributions of shares of the distributing corporation, including distributions in the form of a stock split or stock dividend, are principal. A right to subscribe to shares or other securities issued by the distributing corporation accruing to stockholders on account of their stock ownership and the proceeds of any sale of the right are principal.

B. Except to the extent that the corporation indicates that some part of a corporate distribution is a settlement of preferred or guaranteed dividends accrued since the trustee became a stockholder or is in lieu of an ordinary cash dividend, a corporate distribution is principal if the distribution is pursuant to:

(1) A call of shares;

(2) A merger, consolidation, reorganization, or other plan by which assets of the corporation are acquired by another corporation; or

(3) A total or partial liquidation of the corporation, including any distribution that the corporation indicates is a distribution in total or partial liquidation, or any distribution of assets, other than cash, pursuant to a court decree or final administrative order by a government agency ordering distribution of the particular assets.

C. Distributions made from ordinary income by a regulated investment company or by a trust qualifying and electing to be taxed under federal law as a real estate investment trust are income. All other distributions made by the company or trust, including distributions from capital gains, depreciation, or depletion, whether in the form of cash or an option to take new stock or cash or an option to purchase additional shares, are principal.

D. All other corporate distributions are income, including cash dividends, distributions of, or rights to subscribe to, shares, securities, or obligations of corporations other than the distributing corporation, and the proceeds of the rights or of the property distributions, except as Sub-sections A, B, or C above provide otherwise.

E. If the distributing corporation gives a stockholder an option to receive a distribution either in cash or in its own shares, the distribution chosen is income, except as provided in Sub-sections B and C of this section.

F. A trustee may rely upon any statement of the distributing corporation as to any fact relevant under any provision of this Sub-part concerning the source or character of dividends or distributions of corporate assets.