Question

The 1997 Revision of the Uniform Principal & Income Act allocates or apportions amounts received from Oil & Gas:

a. 90% to principal, 10% to income
b. 50% to principal, 50% to income
c. 10% to principal, 90% to income
d. 100% to income

Answer 1

The Uniform Principal & Income Act of 1997 requires that amounts received from oil and gas are allocated 90% to principal and 10% to income, given the principle of asset depletion and income generation for beneficiaries (a).

Step-by-step explanation:

The 1997 Revision of the Uniform Principal & Income Act (UPIA) provides guidelines for trustees on how to allocate receipts between principal and income. According to the UPIA, amounts received from oil & gas operations are to be allocated 90% to principal and 10% to income.

This allocation is meant to reflect the reduction in value (depletion) of the underlying asset - in this case, the oil and gas reserves - while providing income beneficiaries with a portion of the proceeds. Additionally, this apportionment applies unless a different arrangement is provided for by the trust instrument or applicable law.