J. MILLARD TAWES, Governor                     1447

ENTITLED TO STOCK DIVIDENDS REPRESENTING EARN-
INGS DURING THE LIFE TENANCY. 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 guar-
anteed dividends accrued since the trustee became a stockholder or is
in lieu of an ordinary cash dividend, a corporate distribution is prin-
cipal 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 corpora-
tion; or

(3)    a total or partial liquidation of the corporation, including any
distribution which 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 govern-
ment 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 distribu-
tions 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)    Except as provided in subsections (a), (b), and (c), all cor-
porate distributions are income, including cash dividends, distribu-
tions of or rights to subscribe to shares or securities or obligations of
corporations other than the distributing corporation, and the pro-
ceeds of the rights or property distributions. Except as provided in
subsections (b) and (c), if the distributing corporation gives a stock-
holder an option to receive a distribution either in cash or in its own
shares, the distribution chosen is income.

(e)    The trustee may rely upon any statement of the distributing
corporation as to any fact relevant under any provision of this Article
concerning the source or character of dividends or distributions of
corporate assets.

7.

(a)    Bonds or other obligations for the payment of money, and
ground rents, are principal at their inventory value, except as pro-
vided in subsection (b) for discount bonds. No provision shall be
made for amortization of premiums or for accumulation for discount.
The proceeds of sale, redemption, or other disposition of the bonds,
obligations or ground rents, are principal.

(b)    The increment in value of a bond or other obligation for the
payment of money payable at a future time in accordance with a fixed
schedule of appreciation in excess of the price at which it was issued
is distributable as income. The increment in value is distributable to
the beneficiary who was the income beneficiary at the time of in-