Special tax benefits - rules

(1) A unitrust policy may: (a) Provide methods and standards for: (I) Determining the timing of distributions; (II) Making distributions in cash or in kind or partly in cash and partly in kind; or (III) Correcting an underpayment or overpayment to a beneficiary based on the unitrust amount if there is an error in calculating the unitrust amount; (b) Specify sources and the order of sources, including categories of income for federal income tax purposes, from which distributions of a unitrust amount are paid; or (c) Provide other standards and rules the fiduciary determines serve the interests of the beneficiaries. (2) If a trust qualifies for a special tax benefit or a fiduciary is not an independent person: (a) The unitrust rate established under section 15-1.2-306 may not be less than three percent or more than five percent; (b) The only provisions of section 15-1.2-307 which apply are section 15-1.2-307 (1), (2)(a), (2)(d), (2)(e)(I), and (2)(i); (c) The only period that may be used under section 15-1.2-308 is a calendar year under section 15-1.2-308 (1)(a); and (d) The only other provisions of section 15-1.2-308 which apply are section 15-1.2-308 (2)(b)(I) and (2)(c). (3) Unless otherwise provided by the terms of unitrust policy or the terms of the trust, the distribution amount each year shall be deemed to be paid from the following sources for that year in the following order: (a) Net income determined as if the trust was not a unitrust; (b) Other ordinary income as determined for federal income tax purposes; (c) Net realized short-term capital gains as determined for federal income tax purposes; (d) Net realized long-term capital gains as determined for federal income tax purposes; (e) Trust principal comprising assets for which there is a readily available market value; and (f) Other trust principal.