KRS 386.474: Receipts from obligation to pay money -- Exceptions.

(1) An amount received as interest, whether determined at a fixed, variable, or floating

rate, on an obligation to pay money to the trustee, including an amount received as

consideration for prepaying principal, shall be allocated to income without any

provision for amortization of premium.

(2) A trustee shall allocate to principal an amount received from the sale, redemption,

or other disposition of an obligation to pay money to the trustee more than one (1)

year after it is purchased or acquired by the truste e, including an obligation whose

purchase price or value when it is acquired is less than its value at maturity. If the

obligation matures within one (1) year after it is purchased or acquired by the

trustee, an amount received in excess of its purchase pr ice or its value when

acquired by the trust shall be allocated to income.

(3) This section shall not apply to an obligation to which KRS 386.472, 386.480,

386.482, 386.484, or 386.486 applies.