KRS 386.496: Transfers from income to reimburse principal.

(1) If a trustee makes or expects to make a principal disbursement described in this

section, the trustee may transfer an appropriate amount from income to principal in

one (1) or more accounting periods to reimburse principal or to provide a reserve

for future principal disbursements.

(2) Principal disbursements to which subsection (1) of this section applies include the

following, but only to the extent that the trustee has not been and does not expect to

be reimbursed by a third party:

(a) An amount chargeab le to income but paid from principal because it is

unusually large, including extraordinary repairs;

(b) A capital improvement to a principal asset, whether in the form of changes to

an existing asset or the construction of a new asset, including special

assessments;

(c) Disbursements made to prepare property for rental, including tenant

allowances, leasehold improvements, and broker's commissions;

(d) Periodic payments on an obligation secured by a principal asset to the extent

that the amount transferred from income to principal for depreciation is less

than the periodic payments; and

(e) Disbursements described in KRS 386.492(1)(g).

(3) If the asset whose ownership gives rise to the disbursements becomes subject to a

successive income interest after an in come interest ends, a trustee may continue to

transfer amounts from income to principal as provided in subsection (1) of this

section.