(1) A tax required to be paid by a trustee based on receipts allocated to income must be charged to income.

     (2) A tax required to be paid by a trustee based on receipts allocated to principal must be charged to principal, even if the tax is called an income tax by the taxing authority.

     (3) A tax required to be paid by a trustee on the trust's share of an entity's taxable income must be charged:

     (a) To income to the extent that receipts from the entity are allocated only to income;

     (b) To principal to the extent that receipts from the entity are allocated only to principal;

     (c) Proportionately to income and principal to the extent that receipts from the entity are allocated to both income and principal;

     (d) Otherwise to principal.

     (4) Before applying subsections (1) through (3) of this section, the trustee must adjust income or principal receipts by the distributions to a beneficiary for which the trust receives an income tax deduction.

[2011 c 33 § 1; 2002 c 345 § 505.]