(a) To the extent that a trustee accounts for receipts from an interest in minerals or other natural resources pursuant to this section, the trustee shall allocate them as follows:

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Terms Used In Tennessee Code 35-6-411

  • Decedent: A deceased person.
  • Donor: The person who makes a gift.
  • Income: means money or property that a fiduciary receives as current return from a principal asset. See Tennessee Code 35-6-102
  • Lease: A contract transferring the use of property or occupancy of land, space, structures, or equipment in consideration of a payment (e.g., rent). Source: OCC
  • Principal: means property held in trust for distribution to a remainder beneficiary when the trust terminates. See Tennessee Code 35-6-102
  • Trustee: A person or institution holding and administering property in trust.
  • Trustee: includes an original, additional, or successor trustee, whether or not appointed or confirmed by a court. See Tennessee Code 35-6-102
(1) If received as nominal delay rental or nominal annual rent on a lease, a receipt must be allocated to income;
(2) If received from a production payment, a receipt must be allocated to income if and to the extent that the agreement creating the production payment provides a factor for interest or its equivalent. The balance must be allocated to principal;
(3) If an amount received as a royalty, shut-in-well payment, take-or-pay payment, bonus, or delay rental is more than nominal, ninety percent (90%) must be allocated to principal and the balance to income; and
(4) If an amount is received from a working interest or any other interest not provided for in subdivision (1), (2), or (3), ninety percent (90%) of the net amount received must be allocated to principal and the balance to income.
(b) An amount received on account of an interest in water that is renewable must be allocated to income. If the water is not renewable, ninety percent (90%) of the amount must be allocated to principal and the balance to income.
(c) This chapter applies whether or not a decedent or donor was extracting minerals, water, or other natural resources before the interest became subject to the trust.
(d) If a trust owns an interest in minerals, water, or other natural resources on June 30, 1999, the trustee may allocate receipts from the interest as provided in this chapter or in the manner used by the trustee before July 1, 1999. If the trust acquires an interest in minerals, water, or other natural resources on or after July 1, 1999, the trustee shall allocate receipts from the interest as provided in this chapter.
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