KRS 386.484: Receipts from minerals, water, and other natural resources.

(1) 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:

(a) If received as nominal delay rental or nominal annual rent on a lease, a re ceipt

shall be allocated to income;

(b) If received from a production payment, a receipt shall 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 shal l be allocated

to principal;

(c) 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%)

shall be allocated to principal and the balance to income; or

(d) If an amount is received from a working interest or any other interest not

provided for in paragraph (a), (b), or (c) of this subsection, ninety percent

(90%) of the net amount received shall be allocated to principal and the

balance to income.

(2) An amount received on account of an interest in water that is renewable shall be

allocated to income. If the water is not renewable, ninety percent (90%) of the

amount shall be allocated to principal and the balance to income.

(3) KRS 386.450 to 386.504 apply whether or not a decedent or donor was extracting

minerals, water, or other natural resources before the interest became subject to the

trust.

(4) If a trust owns an interest in minerals, water, or other natural resources on January

1, 2005, the trustee may allocate rece ipts from the interest as provided in KRS

386.450 to 386.504 or in the manner used by the trustee before January 1, 2005. If

the trust acquires an interest in minerals, water, or other natural resources after

January 1, 2005, the trustee shall allocate rec eipts from the interest as provided in

KRS 386.450 to 386.504.

(5) The proceeds from any disposition of an interest specified in this section shall be

allocated in the same manner as receipts from the interest.