J. MILLARD TAWES, Governor                     1449

10.

Except as provided in §9, if the principal consists of property sub-
ject to depletion, including leaseholds (except those subject to ground
rents renewable forever), patents, copyrights, royalty rights, and
rights to receive payments on a contract for deferred compensation,
receipts from the property, not in excess of 5% per year of its in-
ventory value, are income, and the balance is principal.

11.

(a)    The following charges shall be made against income:

(1)    ordinary expenses incurred in connection with the adminis-
tration, management, or preservation of the trust property, including
regularly recurring taxes assessed against any portion of the prin-
cipal, water rates, premiums on insurance taken upon the interests
of the income beneficiary, remainderman, or trustee, interest paid by
the trustee, ground rents, and ordinary repairs;

(2)    a reasonable allowance for depreciation on property subject
to depreciation under generally accepted accounting principles, but
no allowance shall be made for depreciation of that portion of any
property used by a beneficiary as a residence or for depreciation of
any property, as then constituted, held by the trustee on the effective
date of this Article for which the trustee is not then making an allow-
ance for depreciation;

(3)    one-half of court costs, attorney's fees, and other fees on
periodic judicial accounting, unless the court directs otherwise;

(4) court costs, attorney's fees, and other fees on other account-
ings or judicial proceedings if the matter primarily concerns the
income interest, unless the court directs otherwise;

(5)    trustees' compensation on income as provided by §199 of
Article 16 and all expenses reasonably incurred for current manage-
ment of principal and application of income;

(6)    any tax levied upon receipts defined as income under this
Article or the trust instrument and payable by the trustee.

(b)    If charges against income are of unusual amount, the trustee
may by means of reserves or other reasonable means charge them
over a reasonable period of time and withhold from distribution suffi-
cient sums to regularize distributions.

(c)    The following charges shall be made against principal:

(1)    special compensation of trustees, expenses reasonably in-
curred in connection with principal, court costs and attorney's fees
primarily concerning matters of principal, and trustee's compensation
on principal as provided by §199 of Article 16;

(2)    charges not provided for in subsection (a), including the
cost of investing and reinvesting principal, the payments on principal
of an indebtedness (including a mortgage amortized by periodic pay-
ments of principal and mortgage prepayment charges), expenses for
preparation of property for rental or sale, and, unless the court
directs otherwise, expenses incurred in maintaining or defending any
action to construe the trust or protect it or the property or assure
the title of any trust property;