MARVIN MANDEL, Governor                                   215

BENEFICIARY AT THE TIME OF INCREMENT FROM THE FIRST
PRINCIPAL CASH AVAILABLE OR, IF NONE IS AVAILABLE, WHEN
REALIZED BY SALE, REDEMPTION, OR OTHER DISPOSITION.
WHENEVER UNREALIZED INCREMENT IS DISTRIBUTED AS INCOME
BUT OUT OF PRINCIPAL, THE PRINCIPAL SHALL BE REIMBURSED
FOR THE INCREMENT WHEN REALIZED.

14-207. ALLOCATION OF PROFITS AND LOSSES FROM
CONTINUANCE OF SETTLOR'S BUSINESS; ACCOUNTING PRINCIPLES
APPLICABLE TO AGRICULTURAL OPERATIONS.

(A)    IF A TRUSTEE USES ANY PART OF THE PRINCIPAL IN
THE CONTINUANCE OF A BUSINESS OF WHICH THE SETTLOR OR THE
DECEDENT HAS A SOLE PROPRIETOR OR A PARTNER, THE NET
PROFITS OF THE BUSINESS, COMPUTED IN ACCORDANCE WITH
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES FOR A COMPARABLE
BUSINESS, ARE INCOME. IF A LOSS RESULTS IN ANY FISCAL
OR CALENDAR YEAR, THE LOSS FALLS ON PRINCIPAL AND SHALL
NOT BE CARRIED INTO ANY OTHER FISCAL OR CALENDAR YEAR FOR
PURPOSES OF CALCULATING NET INCOME.

(B)   GENERALLY ACCEPTED ACCOUNTING PRINCIPLES SHALL
BE USED TO DETERMINE INCOME FROM AN AGRICULTURAL OR
FARMING OPERATION, INCLUDING THE RAISING OF ANIMALS OR
THE OPERATION OF A NURSERY.

14-208. ROYALTIES AND OTHER INTERESTS IN MINERALS OR
OTHER NATURAL RESOURCES.

(A) IF ANY PART OF THE PRINCIPAL CONSISTS OF A
RIGHT TO RECEIVE ROYALTIES, OVERRIDING OR LIMITED
ROYALTIES, WORKING INTERESTS, PRODUCTION PAYMENTS, NET
PROFIT INTERESTS, OR OTHER INTERESTS IN MINERALS OR OTHER
NATURAL RESOURCES IN, ON OR UNDER LAND, THE RECEIPTS FROM
TAKING THE NATURAL RESOURCES FROM THE LAND SHALL BE
ALLOCATED AS FOLLOWS:

(1)    IF RECEIVED AS RENT ON A LEASE OR
EXTENSION PAYMENTS ON A LEASE, THE RECEIPTS ARE INCOME.

(2)    IF RECEIVED FROM A PRODUCTION PAYMENT,
THE RECEIPTS ARE INCOME TO THE EXTENT OF ANY FACTOR FOR
INTEREST OR ITS EQUIVALENT PROVIDED IN THE GOVERNING
INSTRUMENT. THERE SHALL BE ALLOCATED TO PRINCIPAL THE
FRACTION OF THE BALANCE OF THE RECEIPTS WHICH THE
UNRECOVERED COST OF THE PRODUCTION PAYMENT BEARS TO THE
BALANCE OWED ON THE PRODUCTION PAYMENT, EXCLUSIVE OF ANY
FACTOR FOR INTEREST OR ITS EQUIVALENT. THE RECEIPTS NOT
ALLOCATED TO PRINCIPAL ARE INCOME.

(3)   IF RECEIVED AS A ROYALTY, OVERRIDING OR
LIMITED ROYALTY, OR BONUS, OR FROM A WORKING, NET PROFIT,
OR ANY OTHER INTEREST IN MINERALS OR OTHER NATURAL
RESOURCES, RECEIPTS NOT PROVIDED FOR IN THE PRECEDING