For example, in most cases, interest and dividends will be income. However, there are many situations where the answer is far from obvious. This memorandum assumes that the reader has a general familiarity with the existing California principal and income law. Thus, this memorandum focuses on changes from the prior law. We've greatly simplified a number of complex rules and ignored many refinements and exceptions.
All references are to the California Probate Code.
As a general rule, the effect of the new law is to treat as principal many items that previously were considered income. Presumption of Receipt as Principal . There is a presumption in favor of a receipt being principal. Right of Independent Trustee To Make Adjustments . An independent trustee can't make these adjustments if certain adverse tax effects would result.