Colorado Code
Part 4 - Uniform Principal and Income Act
§ 15-1-418. Insubstantial Allocations Not Required

Source: L. 2000: Entire part R&RE, p. 1141, § 1, effective July 1, 2001.
This section is intended to relieve a trustee from making relatively small allocations while preserving the trustee's right to do so if an allocation is large in terms of absolute dollars.
For example, assume that a trust's assets, which include a working interest in an oil well, have a value of $1,000,000; the net income from the assets other than the working interest is $40,000; and the net receipts from the working interest are $400. The trustee may allocate all of the net receipts from the working interest to principal instead of allocating 10%, or $40, to income under Section 15-1-421. If the net receipts from the working interest are $35,000, so that the amount allocated to income under Section 15-1-421 would be $3,500, the trustee may decide that this amount is sufficiently significant to the income beneficiary that the allocation provided for by Section 15-1-421 should be made, even though the trustee is still permitted under Section 15-1-418 to allocate all of the net receipts to principal because the $3,500 would increase the net income of $40,000, as determined before making an allocation under Section 15-1-421, by less than 10%. Section 15-1-418 will also relieve a trustee from having to allocate net receipts from the sale of trees in a small woodlot between principal and income.
While the allocation to principal of small amounts under this section should not be a cause for concern for tax purposes, allocations are not permitted under this section in circumstances described in Section 15-1-404 (3) to eliminate claims that the power in this section has adverse tax consequences.

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