Federal Register / Vol. 66, No. 32 / Thursday, February 15, 2001 / Proposed Rules 10393

Maintenance Inspector, who may add

comments and then send it to the Manager,

Seattle ACO.

Note 3: Information concerning the

existence of approved alternative methods of

compliance with this AD, if any, may be

obtained from the Seattle ACO.

Special Flight Permit

(e) Special flight permits may be issued per

sections 21.197 and 21.199 of the Federal

Aviation Regulations (14 CFR 21.197 and

21.199) to operate the airplane to a location

where the requirements of this AD can be

done.

Issued in Renton, Washington, on February

9, 2001.

Vi L. Lipski,

Manager, Transport Airplane Directorate,

Aircraft Certification Service.

[FR Doc. 01–3858 Filed 2–14–01; 8:45 am]

BILLING CODE 4910–13–U

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. 2000–NM–317–AD]

RIN 2120–AA64

Airworthiness Directives; Boeing

Model 747 Series Airplanes

AGENCY: Federal Aviation

Administration, DOT.

ACTION: Notice of proposed rulemaking

(NPRM).

SUMMARY: This document proposes the

supersedure of an existing airworthiness

directive (AD), which applies to all

Boeing Model 747 series airplanes. The

existing AD currently requires, for

certain airplanes, revising the Airplane

Flight Manual, and, for all airplanes,

performing repetitive inspections for

wear or damage of the inlet check valves

and inlet adapters of the override/

jettison pumps, and corrective actions,

if necessary. This action would apply to

fewer airplanes than the existing AD

and require rework of certain

components, which would end the

repetitive inspection requirement. These

actions are necessary to ensure that the

flight crew is advised of the hazards of

dry operation of the override/jettison

pumps of the center wing fuel tank, and

to prevent wear or damage to the inlet

check valves and inlet adapters of the

override/jettison pumps, which could

result in a fire or explosion in the fuel

tank during dry (no fuel) operation. This

action is intended to address the

identified unsafe condition.

DATES: Comments must be received by

April 2, 2001.

ADDRESSES: Submit comments in

triplicate to the Federal Aviation

Administration (FAA), Transport

Airplane Directorate, ANM–114,

Attention: Rules Docket No. 2000–NM–

317–AD, 1601 Lind Avenue, SW.,

Renton, Washington 98055–4056.

Comments may be inspected at this

location between 9 a.m. and 3 p.m.,

Monday through Friday, except Federal

holidays. Comments may be submitted

via fax to (425) 227–1232. Comments

may also be sent via the Internet using

the following address: 9-anmnprmcomment@faa.gov. Comments sent

via fax or the Internet must contain

‘‘Docket No. 2000–NM–317–AD’’ in the

subject line and need not be submitted

in triplicate. Comments sent via the

Internet as attached electronic files must

be formatted in Microsoft Word 97 for

Windows or ASCII text.

The service information referenced in

the proposed rule may be obtained from

Boeing Commercial Airplane Group,

P.O. Box 3707, Seattle, Washington

98124–2207. This information may be

examined at the FAA, Transport

Airplane Directorate, 1601 Lind

Avenue, SW., Renton, Washington.

FOR FURTHER INFORMATION CONTACT:

Sulmo Mariano, Aerospace Engineer,

Propulsion Branch, ANM–140S, FAA,

Seattle Aircraft Certification Office,

1601 Lind Avenue, SW., Renton,

Washington 98055–4056; telephone

(425) 227–2686; fax (425) 227–1181.

SUPPLEMENTARY INFORMATION:

Comments Invited

Interested persons are invited to

participate in the making of the

proposed rule by submitting such

written data, views, or arguments as

they may desire. Communications shall

identify the Rules Docket number and

be submitted in triplicate to the address

specified above. All communications

received on or before the closing date

for comments, specified above, will be

considered before taking action on the

proposed rule. The proposals contained

in this action may be changed in light

of the comments received.

Submit comments using the following

format:

• Organize comments issue-by-issue.

For example, discuss a request to

change the compliance time and a

request to change the service bulletin

reference as two separate issues.

• For each issue, state what specific

change to the proposed AD is being

requested.

• Include justification (e.g., reasons or

data) for each request.

Comments are specifically invited on

the overall regulatory, economic,

environmental, and energy aspects of

the proposed rule. All comments

submitted will be available, both before

and after the closing date for comments,

in the Rules Docket for examination by

interested persons. A report

summarizing each FAA-public contact

concerned with the substance of this

proposal will be filed in the Rules

Docket.

Commenters wishing the FAA to

acknowledge receipt of their comments

submitted in response to this action

must submit a self-addressed, stamped

postcard on which the following

statement is made: ‘‘Comments to

Docket Number 2000–NM–317–AD.’’

The postcard will be date-stamped and

returned to the commenter.

Availability of NPRMs

Any person may obtain a copy of this

NPRM by submitting a request to the

FAA, Transport Airplane Directorate,

ANM–114, Attention: Rules Docket No.

2000–NM–317–AD, 1601 Lind Avenue,

SW., Renton, Washington 98055–4056.

Discussion

On July 30, 1998, the FAA issued AD

98–16–19, amendment 39–10695 (63 FR

42210, August 7, 1998), applicable to all

Boeing Model 747 series airplanes. That

AD requires, for certain airplanes,

revising the Airplane Flight Manual

(AFM) to advise the flightcrew of

limitations on dry (no fuel) operation of

the override/jettison pumps of the

center wing fuel tank. That AD also

requires repetitive inspections for wear

or damage of the inlet check valves and

inlet adapters of the override/jettison

pumps, and replacement of the check

valves and pumps with new or

serviceable parts, if necessary. For

affected airplanes, such replacement

allows the AFM revision to be removed.

That AD was prompted by a report that

inlet adapters of override/jettison

pumps were found to be worn

excessively, which allowed contact to

occur between the inlet check valve and

the inducer. The requirements of that

AD are intended to ensure that the

flightcrew is advised of the hazards of

dry operation of the override/jettison

pumps of the center wing fuel tank, and

to detect and correct wear or damage to

the inlet check valves and inlet adapters

of the override/jettison pumps. Such

conditions, if not corrected, could result

in a fire or explosion in the fuel tank

during dry operation.

Actions Since Issuance of Previous Rule

The preamble to AD 98–16–19 stated

that the FAA considered the

requirements of that AD to be ‘‘interim

action’’ and that the manufacturer was

10394 Federal Register / Vol. 66, No. 32 / Thursday, February 15, 2001 / Proposed Rules

developing a modification to positively

address the unsafe condition. The FAA

indicated that it might consider further

rulemaking action once the modification

was developed, approved, and available.

The manufacturer now has developed

such a modification, and the FAA has

determined that further rulemaking

action is indeed necessary. This

proposed AD follows from that

determination.

Also, the existing AD applies to all

Boeing Model 747 series airplanes.

Boeing has informed the FAA that the

approved modification will be installed

on all Model 747 series airplanes having

line number 1252 and subsequent. The

FAA has determined that installation of

the modification during production is

adequate to address the unsafe

condition. Therefore, the FAA finds that

the actions required by the existing AD

and the actions in this proposed AD are

not necessary for airplanes modified in

production, which leads the FAA to

remove those airplanes from the

applicability of this proposed AD.

Explanation of Relevant Service

Information

The FAA has reviewed and approved

Boeing Service Bulletin 747–28A2212,

Revision 3, dated August 3, 2000. That

service bulletin describes actions

identical to those in Boeing Alert

Service Bulletin 747–28A2212, Revision

2, dated May 14, 1998, which was

referenced in the existing AD as the

appropriate source of service

information. Revision 3 of the service

bulletin also describes procedures for a

terminating action that entails rework of

the existing pump housing and impeller

motor assembly, which includes

replacement of the existing inlet check

valve and inlet adapter with new,

improved parts, and reidentification of

the pump housing and impeller motor

assembly with new part numbers. This

rework eliminates the need for the

currently required repetitive

inspections. Accomplishment of the

actions specified in Revision 3 of the

service bulletin is intended to

adequately address the identified unsafe

condition.

Revision 3 of the service bulletin

refers to Crane Hydro-Aire Service

Bulletins 60–703–28–33, 60–703–28–35,

60–721–28–5, and 60–723–28–5, as

secondary sources of information for the

rework of the pump housing and

impeller motor assembly. The FAA has

reviewed Revision 1 of these service

bulletins, all dated November 20, 2000,

and finds them acceptable secondary

sources of information for the rework.

Explanation of Requirements of

Proposed Rule

Since an unsafe condition has been

identified that is likely to exist or

develop on other products of this same

type design, the proposed AD would

supersede AD 98–16–19 to continue to

require repetitive inspections for wear

or damage of the inlet check valves and

inlet adapters of the override/jettison

pumps, and corrective actions, if

necessary. This proposed AD would

also continue to require, for certain

airplanes, revising the Airplane Flight

Manual (AFM) to advise the flightcrew

of limitations on dry (no fuel) operation

of the override/jettison pumps of the

center wing fuel tank, until the

repetitive inspections described above

have been done. This action would

apply to fewer airplanes than the

existing AD, and would add a new

requirement for rework of the existing

pump housing and impeller motor

assembly, which would end the

repetitive inspection requirement. The

actions would be required to be

accomplished in accordance with the

service bulletin described previously,

except as discussed below.

Differences Between This Proposed AD

and the Service Bulletin

As stated above, Revision 3 of the

service bulletin describes procedures for

rework of the existing pump housing

and impeller motor assembly, which

gets rid of the need for the repetitive

inspections. The service bulletin

provides for the rework as optional. The

FAA finds it necessary to require

operators to do this rework. The

decision to propose the rework is based

on the FAA’s position that

modifications or design changes to

remove the source of a problem will

ensure continued operational safety

over the long term better than repetitive

inspections. The view that repetitive

inspections may be inadequate to ensure

the safety of the transport airplane fleet,

along with consideration of the human

factors associated with repetitive

inspections, has led the FAA to place

less emphasis on special procedures,

such as repetitive inspections, and more

emphasis on design improvements.

In developing the 18-month

compliance time for this action, the

FAA considered these factors:

• The urgency of the subject unsafe

condition,

• The amount of time it takes to do

the replacement (10 work hours), and

• The amount of time needed to allow

most operators to do the replacement

during normal scheduled maintenance.

The FAA finds that 18 months is the

optimal amount of time that will allow

the rework to be done on all affected

airplanes without compromising flight

safety.

Cost Impact

There are approximately 1,100

airplanes of the affected design in the

worldwide fleet. The FAA estimates that

250 airplanes of U.S. registry would be

affected by this proposed AD.

For affected airplanes, the AFM

revision currently required by AD 98–

16–19 takes approximately 1 work hour

per airplane to accomplish, at an

average labor rate of $60 per work hour.

Based on these figures, the FAA

estimates that the cost impact of this

action is $60 per airplane.

The inspections currently required by

AD 98–16–19 take approximately 12

work hours per airplane to accomplish,

at an average labor rate of $60 per work

hour. Based on these figures, the FAA

estimates that the cost impact of this

action on U.S. operators is $180,000, or

$720 per airplane, per inspection cycle.

The rework proposed in this AD

action would take approximately 6 work

hours per airplane to accomplish, at an

average labor rate of $60 per work hour.

Required parts would cost

approximately $1,978 per airplane.

Based on these figures, the FAA

estimates that the cost impact of the

proposed replacement on U.S. operators

is $584,500, or $2,338 per airplane. The

FAA has been advised that

manufacturer warranty remedies may be

available for labor costs and parts

associated with accomplishing the

proposed rework. Therefore, the future

economic cost impact of this action on

U.S. operators may be less than the cost

impact figure indicated above.

The cost impact figures discussed

above are based on assumptions that no

operator has yet accomplished any of

the proposed requirements of this AD

action, and that no operator would

accomplish those actions in the future if

this proposed AD were not adopted. The

cost impact figures discussed in AD

rulemaking actions represent only the

time necessary to perform the specific

actions actually required by the AD.

These figures typically do not include

incidental costs, such as the time

required to gain access and close up,

planning time, or time necessitated by

other administrative actions.

Regulatory Impact

The regulations proposed herein

would not have a substantial direct

effect on the States, on the relationship

between the national Government and

the States, or on the distribution of

power and responsibilities among the

various levels of government.

Federal Register / Vol. 66, No. 32 / Thursday, February 15, 2001 / Proposed Rules 10395

Therefore, it is determined that this

proposal would not have federalism

implications under Executive Order

13132.

For the reasons discussed above, I

certify that this proposed regulation (1)

is not a ‘‘significant regulatory action’’

under Executive Order 12866; (2) is not

a ‘‘significant rule’’ under the DOT

Regulatory Policies and Procedures (44

FR 11034, February 26, 1979); and (3) if

promulgated, will not have a significant

economic impact, positive or negative,

on a substantial number of small entities

under the criteria of the Regulatory

Flexibility Act. A copy of the draft

regulatory evaluation prepared for this

action is contained in the Rules Docket.

A copy of it may be obtained by

contacting the Rules Docket at the

location provided under the caption

ADDRESSES.

List of Subjects in 14 CFR Part 39

Air transportation, Aircraft, Aviation

safety, Safety.

The Proposed Amendment

Accordingly, pursuant to the

authority delegated to me by the

Administrator, the Federal Aviation

Administration proposes to amend part

39 of the Federal Aviation Regulations

(14 CFR part 39) as follows:

PART 39—AIRWORTHINESS

DIRECTIVES

1. The authority citation for part 39

continues to read as follows:

Authority: 49 U.S.C. 106(g), 40113, 44701.

§ 39.13 [Amended]

2. Section 39.13 is amended by

removing amendment 39–10695 (63 FR

42210, August 7, 1998), and by adding

a new airworthiness directive (AD), to

read as follows:

Boeing: Docket 2000–NM–317–AD.

Supersedes AD 98–16–19, Amendment

39–10695.

Applicability: Model 747 series airplanes,

line numbers 1 through 1251 inclusive,

certificated in any category.

Note 1: This AD applies to each airplane

identified in the preceding applicability

provision, regardless of whether it has been

modified, altered, or repaired in the area

subject to the requirements of this AD. For

airplanes that have been modified, altered, or

repaired so that the performance of the

requirements of this AD is affected, the

owner/operator must request approval for an

alternative method of compliance in

accordance with paragraph (f)(1) of this AD.

The request should include an assessment of

the effect of the modification, alteration, or

repair on the unsafe condition addressed by

this AD; and, if the unsafe condition has not

been eliminated, the request should include

specific proposed actions to address it.

Compliance: Required as indicated, unless

accomplished previously.

To ensure that the flightcrew is advised of

the hazards of dry operation of the override/

jettison pumps of the center wing fuel tank,

and to prevent wear or damage to the inlet

check valves and inlet adapters of the

override/jettison pumps, which could result

in a fire or explosion in the fuel tank during

dry operation, accomplish the following:

Restatement of Requirements of AD 98–16–

19

Airplane Flight Manual Revision

(a) For airplanes that have accumulated

20,000 total hours time-in-service or more as

of August 24, 1998 (the effective date of AD

98–16–19, amendment 39–10695): Within 14

days after August 24, 1998, revise the

Limitations section of the FAA-approved

Airplane Flight Manual (AFM) to include the

following procedures. This may be

accomplished by inserting a copy of this AD

into the AFM.

‘‘If the center tank override/jettison fuel

pumps are to be used, there must be at least

17,000 pounds (7,720 kilograms) of fuel in

the center tank prior to engine start.

‘‘Do not operate the center tank override/

jettison fuel pumps with less than 7,000

pounds (3,200 kilograms) of fuel in the center

tank. For airplanes with an inoperative center

tank scavenge system, this 7,000 pounds of

center tank fuel must be considered

unusable.

‘‘If the center tank override/jettison fuel

pumps circuit breakers are tripped, do not

reset.’’

Repetitive Inspections and Corrective Actions

(b) Prior to the accumulation of 10,000

total hours time-in-service, or within 90 days

after August 24, 1998, whichever occurs

later, accomplish the requirements of

paragraphs (b)(1) and (b)(2) of this AD, in

accordance with the Accomplishment

Instructions specified in Boeing Alert Service

Bulletin 747–28A2212, Revision 2, dated

May 14, 1998, or Revision 3, dated August 3,

2000.

(1) Perform a detailed visual inspection for

wear or damage of the inlet check valve of

the left and right override/jettison pumps of

the center wing fuel tank.

(i) If the inlet check valve passes all wear

and damage criteria, as specified in Figure 3

of the service bulletin, accomplish the

actions specified in paragraph (b)(1)(i)(A),

(b)(1)(i)(B), or (b)(1)(i)(C) of this AD, as

applicable.

(A) If the wear to the stainless steel disk

is less than or equal to 0.70 inch, and does

not penetrate the disk, repeat the inspection

thereafter at intervals not to exceed 10,000

hours time-in-service after the last

inspection, until paragraph (d) of this AD has

been done.

(B) If the wear to the stainless steel disk is

greater than 0.70 inch, and does not penetrate

the disk, repeat the inspection thereafter at

intervals not to exceed 1,000 hours time-inservice after the last inspection, until

paragraph (d) of this AD has been done.

(C) If the wear penetrates the stainless steel

disk of the inlet check valve, prior to further

flight, accomplish the actions specified in

paragraph (b)(1)(ii) of this AD.

(ii) If the inlet check valve fails any wear

or damage criteria, as specified in Figure 3

of the service bulletin, prior to further flight,

replace the existing check valve with a new

or serviceable check valve, in accordance

with the service bulletin. Repeat the

inspection thereafter at intervals not to

exceed 10,000 hours time-in-service after the

last inspection, until paragraph (d) of this AD

has been done.

(2) Perform a detailed visual inspection for

wear or damage of the inlet adapter of the left

and right override/jettison pumps of the

center wing fuel tank.

(i) If the wear to the inlet adapter is less

than or equal to 0.50 inch, prior to further

flight, reinstall the existing override/jettison

pump, in accordance with the alert service

bulletin. Repeat the inspection thereafter at

intervals not to exceed 10,000 hours time-inservice after the last inspection, until

paragraph (d) of this AD has been done.

(ii) If the wear to the inlet adapter is greater

than 0.50 inch, but less than 0.60 inch, prior

to further flight, accomplish the actions

required by either paragraph (b)(2)(ii)(A) or

(b)(2)(ii)(B), in accordance with the service

bulletin.

(A) Install a new or serviceable override/

jettison pump, and repeat the inspection

thereafter at intervals not to exceed 10,000

hours time-in-service after the last

inspection, until paragraph (d) of this AD has

been done. Or

(B) Reinstall the existing override/jettison

pump, and repeat the inspection thereafter at

intervals not to exceed 1,000 hours time-inservice after the last inspection, until

paragraph (d) of this AD has been done.

(iii) If the wear to the inlet adapter is

greater than or equal to 0.60 inch, prior to

further flight, install a new or serviceable

override/jettison pump, in accordance with

the service bulletin. Repeat the inspection

thereafter at intervals not to exceed 10,000

hours time-in-service after the last

inspection, until paragraph (d) of this AD has

been done.

Note 2: Boeing Alert Service Bulletin 747–

28A2212, Revision 2, dated May 14, 1998,

and Revision 3, dated August 3, 2000,

include figures that illustrate specific areas to

inspect for wear and damage.

Note 3: Accomplishment of the actions

specified in paragraph (b) of this AD prior to

August 24, 1998, in accordance with

Revision 1 of Boeing Alert Service Bulletin

747–28A2212, dated April 23, 1998, is

considered acceptable for compliance with

paragraph (b) of this AD.

Terminating Action for Paragraph (a)

(c) Accomplishment of the actions

specified by paragraph (b) of this AD

constitutes terminating action for the

requirements of paragraph (a) of this AD.

Following accomplishment of those actions,

the AFM revision may be removed from the

AFM.

New Requirements of This AD

Replacement of Pump Housing and Impeller

Motor Assembly

(d) Within 18 months after the effective

date of this AD: Rework the existing pump

10396 Federal Register / Vol. 66, No. 32 / Thursday, February 15, 2001 / Proposed Rules

housing and impeller motor assembly,

including replacing the existing inlet check

valve and inlet adapter with new, improved

parts; in accordance with Boeing Service

Bulletin 747–28A2212, Revision 3, dated

August 3, 2000. This replacement ends the

requirements of paragraphs (a) and (b) of this

AD.

Note 4: Boeing Service Bulletin 747–

28A2212, Revision 3, references Crane

Hydro-Aire Service Bulletins 60–703–28–33,

60–703–28–35, 60–721–28–5, and 60–723–

28–5, as secondary sources of information for

the rework of the pump housing and impeller

motor assembly.

Spares

(e) As of the effective date of this AD, no

person may install a pump housing or

impeller motor assembly with a part number

listed in the ‘‘Existing Part Number’’ column

of the table in Paragraph 2.E. of Boeing

Service Bulletin 747–28A2212, Revision 3,

dated August 3, 2000, on any airplane.

Alternative Methods of Compliance

(f)(1) An alternative method of compliance

or adjustment of the compliance time that

provides an acceptable level of safety may be

used if approved by the Manager, Seattle

Aircraft Certification Office (ACO), FAA.

Operators shall submit their requests through

an appropriate FAA Principal Maintenance

Inspector, who may add comments and then

send it to the Manager, Seattle ACO.

(2) Alternative methods of compliance,

approved previously in accordance with AD

98–16–19, amendment 39–10695, are

approved as alternative methods of

compliance with the corresponding

requirements of this AD.

Note 5: Information concerning the

existence of approved alternative methods of

compliance with this AD, if any, may be

obtained from the Seattle ACO.

Special Flight Permits

(g) Special flight permits may be issued in

accordance with sections 21.197 and 21.199

of the Federal Aviation Regulations (14 CFR

21.197 and 21.199) to operate the airplane to

a location where the requirements of this AD

can be accomplished.

Issued in Renton, Washington, on February

9, 2001.

Vi L. Lipski,

Manager, Transport Airplane Directorate,

Aircraft Certification Service.

[FR Doc. 01–3859 Filed 2–14–01; 8:45 am]

BILLING CODE 4910–13–U

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1, 20, 25, and 26

[REG–106513–00]

RIN 1545–AX96

Definition of Income for Trust

Purposes

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Notice of proposed rulemaking

and notice of public hearing.

SUMMARY: This document contains

proposed regulations revising the

definition of income under section

643(b) of the Internal Revenue Code to

take into account changes in the

definition of trust accounting income

under state laws. The proposed

regulations also clarify the situations in

which capital gains are included in

distributable net income under section

643(a)(3). Conforming amendments are

made to regulations affecting ordinary

trusts, pooled income funds, charitable

remainder trusts, trusts that qualify for

the gift and estate tax marital deduction,

and trusts that are exempt from

generation-skipping transfer taxes. This

document also provides notice of a

public hearing on these proposed

regulations.

DATES: Written and electronic comments

must be received by May 18, 2001.

Outlines of topics to be discussed at the

public hearing scheduled for June 8,

2001 must be received by May 18, 2001.

ADDRESSES: Send submissions to:

CC:M&SP:RU (REG–106513–00), room

5226, Internal Revenue Service, POB

7604, Ben Franklin Station, Washington,

DC 20044. Submissions may be hand

delivered Monday through Friday

between the hours of 8 a.m. and 5 p.m.

to: CC:M&SP:RU (REG–106513–00),

Courier’s Desk, Internal Revenue

Service, 1111 Constitution Avenue,

NW., Washington, DC. Alternatively,

taxpayers may submit comments

electronically via the Internet by

selecting the ‘‘Tax Regs’’ option on the

IRS Home Page, or by submitting

comments directly to the IRS Internet

site at: http://www.irs.ustreas.gov/

tax_regs/regslist.html. The public

hearing will be held in the IRS

Auditorium, Internal Revenue Building,

1111 Constitution Avenue, NW.,

Washington, DC.

FOR FURTHER INFORMATION CONTACT:

Concerning the proposed regulations,

Bradford Poston at (202) 622–3060 (not

a toll-free number); concerning

submissions of comments, the hearing,

and/or to be placed on the building

access list to attend the hearing, Guy R.

Traynor, 202–622–8452 (not a toll-free

number).

SUPPLEMENTARY INFORMATION:

Background

Section 643(b) provides a definition of

the term income for purposes of

subparts A through D of part I of

subchapter J of the Internal Revenue

Code (Code) . The term income, when

not modified by any other term, means

the amount of income of the trust or

estate determined under the terms of the

governing instrument and applicable

local law. Section 1.643(b)–1 further

provides that trust provisions that

depart fundamentally from the concepts

of local law in determining what

constitutes income will not be

recognized.

These statutory and regulatory

provisions date back to a time when,

under state statutes, dividends and

interest were considered income and

were allocated to the income beneficiary

while capital gains were allocated to the

principal of the trust. Changes in the

types of available investments and in

investment philosophies have caused

states to revise, or to consider revising,

these traditional concepts of income and

principal.

The prudent investor standard for

managing trust assets has been enacted

by many states and encourages

fiduciaries to adopt an investment

strategy designed to maximize the total

return on trust assets. Under this

investment strategy, trust assets should

be invested for total positive return, that

is, ordinary income plus appreciation,

in order to maximize the value of the

trust. Thus, under certain economic

circumstances, equities, rather than

bonds, would constitute a greater

portion of the trust assets than they

would under traditional investment

standards.

One of the concerns with shifting

trust investments toward equities and

away from bonds is the potential

adverse impact on the income

beneficiary. Based on the traditional

concepts of income and principal, the

income beneficiary is entitled only to

the dividends and interest earned by the

trust assets. The dividend return on

equities as a percentage of their value

traditionally has been substantially less

than the interest return on bonds.

To ensure that the income beneficiary

is not penalized if a trustee adopts a

total return investment strategy, many

states have made, or are considering

making, revisions to the definitions of