WILLIAM DONALD SCHAEFER, Governor

Ch. 486

Annotated Code of Maryland

(1991 Replacement Volume and 1992 Supplement)

SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF
MARYLAND, That the Laws of Maryland read as follows:

Article - Estates and Trusts

14-206.

(a) Bonds or other obligations for the payment of money, and ground rents, are
principal at their inventory value, except as provided in subsection (b) for discount bonds
OF THIS SECTION. 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) (1) THIS SUBSECTION APPLIES TO ANY OBLIGATION FOR THE PAYMENT
OF MONEY AT A FUTURE TIME, INCLUDING:

(I)      A BOND;

(II)     A ZERO COUPON BOND;

(III)   AN ANNUITY CONTRACT BEFORE ANNUITIZATION;

(IV)   A LIFE INSURANCE CONTRACT BEFORE THE DEATH OF THE

INSURED; AND

(V)     AN INTEREST IN A COMMON TRUST FUND AS DEFINED UNDER
§ 584 OF THE INTERNAL REVENUE CODE WITH RESPECT TO CHARITABLE
REMAINDER TRUSTS AS DEFINED UNDER § 664 OF THE INTERNAL REVENUE CODE
AND POOLED INCOME FUNDS AS DEFINED UNDER § 642(C)(5) OF THE INTERNAL
REVENUE CODE.

[(b)] (2) [The] UNLESS OTHERWISE PROVIDED IN THE TRUST INSTRUMENT
OR IN THIS SUBTITLE, THE increment in value of [a bond or other] AN obligation for
the payment of money payable at a future time in accordance with a fixed, VARIABLE, OR
DISCRETIONARY schedule of appreciation in excess of the price at which it was issued is
distributable as income.

(3)      The increment in value is distributable to the beneficiary who was the
income 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.

(4)      FOR PURPOSES OF THIS SUBSECTION, THE INCREMENT IN VALUE OF
AN OBLIGATION FOR THE PAYMENT OF MONEY SHALL BE AVAILABLE FOR
DISTRIBUTION ONLY WHEN THE TRUSTEE RECEIVES CASH ON ACCOUNT OF THE
OBLIGATION.

SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect
October 1, 1993.

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