KRS 386.470: Principal receipts.

A trustee shall allocate to principal:

(1) To the extent not allocated to income under KRS 386.450 to 386.504, assets

received from a transferor during the transferor's lifetime, a decedent's estate, a trust

with a terminating income interest, or a payer under a contract naming the trust or

its trustee as beneficiary;

(2) Money or other property received from the sale, exchange, liquidation, or change in

form of a principal asset, including stock splits and realized profit, subject to this

article;

(3) Amounts recovered from third parties to reimbur se the trust because of

disbursements described in KRS 386.492(1)(g) or for other reasons to the extent not

based on the loss of income;

(4) Proceeds of property taken by eminent domain, but a separate award made for the

loss of income with respect to an a ccounting period during which a current income

beneficiary had a mandatory income interest is income;

(5) Net income received in an accounting period during which there is no beneficiary to

whom a trustee may or shall distribute income;

(6) If a trustee gr ants an option to buy property from the trust, whether or not the trust

owns the property when the option is granted, grants an option that permits another

person to sell property to the trust, or acquires an option to buy property for the trust

or an option to sell an asset owned by the trust, and the trustee or other owner of the

asset is required to deliver the asset if the option is exercised, an amount received

for granting the option shall be allocated to principal. An amount paid to acquire the

option shall be paid from principal. A gain or loss realized upon the exercise of an

option, including an option granted to a settlor of the trust for services rendered,

shall be allocated to principal; and

(7) Other receipts as provided in KRS 386.478, 386.480 , 386.482, 386.484, 386.486,

and 386.488.