{"formats":[{"name":"JSON","format":"json","url":"\/downloads\/2025\/code-json\/64.2-1048.json"},{"name":"Plain Text","format":"text","url":"\/downloads\/2025\/code-text\/64.2-1048.txt"},{"name":"XML","format":"xml","url":"\/downloads\/2025\/code-xml\/64.2-1048.xml"},{"name":"HTML","format":"html","url":"\/downloads\/2025\/code-html\/64.2-1048.html"}],"law_id":59116,"edition_id":1,"section_id":59116,"structure_id":15510,"section_number":"64.2-1048","catch_line":"Character of receipts from entity","history":"2022, c. 354.","full_text":"A\n\nAs used in this section:\n\t\t\t“Capital distribution” means an entity distribution of money that is a (i) return of capital or (ii) distribution in total or partial liquidation of the entity.\n\t\t\t“Entity” means a corporation, partnership, limited liability company, regulated investment company, real estate investment trust, common trust fund, or any other organization or arrangement in which a fiduciary owns or holds an interest, whether or not the entity is a taxpayer for federal income tax purposes. “Entity” does not include (i) a trust or estate to which § 64.2-1049 applies, (ii) a business or other activity to which § 64.2-1050 applies that is not conducted by an entity described above, (iii) an asset-backed security, or (iv) an instrument or arrangement to which § 64.2-1063 applies.\n\t\t\t“Entity distribution” means a payment or transfer by an entity made to a person in the person’s capacity as an owner or holder of an interest in the entity.B\n\nIn this section, an attribute or action of an entity includes an attribute or action of any other entity in which the entity owns or holds an interest, including an interest owned or held indirectly through another entity.C\n\nExcept as otherwise provided in subdivisions D 2, 3, and 4, a fiduciary shall allocate to income:1\n\nMoney received in an entity distribution; and2\n\nTangible personal property of nominal value received from the entity.D\n\nA fiduciary shall allocate to principal:1\n\nProperty received in an entity distribution that is not:\n\t\t\t\ta. Money; or\n\t\t\t\tb. Tangible personal property of nominal value;2\n\nMoney received in an entity distribution in an exchange for part or all of the fiduciary’s interest in the entity, to the extent the entity distribution reduces the fiduciary’s interest in the entity relative to the interests of other persons that own or hold interests in the entity;3\n\nMoney received in an entity distribution that the fiduciary determines or estimates is a capital distribution; and4\n\nMoney received in an entity distribution from an entity that is:\n\t\t\t\ta. A regulated investment company or real estate investment trust if the money received is a capital gain dividend for federal income tax purposes; or\n\t\t\t\tb. Treated for federal income tax purposes comparably to the treatment described in subdivision a.E\n\nA fiduciary may determine or estimate that money received in an entity distribution is a capital distribution:1\n\nBy relying without inquiry or investigation on a characterization of the entity distribution provided by or on behalf of the entity, unless the fiduciary:\n\t\t\t\ta. Determines, on the basis of information known to the fiduciary, that the characterization is or may be incorrect; or\n\t\t\t\tb. Owns or holds more than 50 percent of the voting interest in the entity;2\n\nBy determining or estimating, on the basis of information known to the fiduciary or provided to the fiduciary by or on behalf of the entity, that the total amount of money and property received by the fiduciary in the entity distribution or a series of related entity distributions is or will be greater than 20 percent of the fair market value of the fiduciary’s interest in the entity; or3\n\nIf neither subdivision 1 nor 2 applies, by considering the factors in subsection F and the information known to the fiduciary or provided to the fiduciary by or on behalf of the entity.F\n\nIn making a determination or estimate under subdivision E 3, a fiduciary may consider:1\n\nA characterization of an entity distribution provided by or on behalf of the entity;2\n\nThe amount of money or property received in:\n\t\t\t\ta. The entity distribution; or\n\t\t\t\tb. What the fiduciary determines is or will be a series of related entity distributions;3\n\nThe amount described in subdivision 2 compared to the amount the fiduciary determines or estimates is, during the current or preceding accounting periods:\n\t\t\t\ta. The entity’s operating income;\n\t\t\t\tb. The proceeds of the entity’s sale or other disposition of:1\n\nAll or part of the business or other activity conducted by the entity;2\n\nOne or more business assets that are not sold to customers in the ordinary course of the business or other activity conducted by the entity; or3\n\nOne or more assets other than business assets, unless the entity’s primary activity is to invest in assets to realize gain on the disposition of all or some of the assets;\n\t\t\t\t\tc. If the entity’s primary activity is to invest in assets to realize gain on the disposition of all or some of the assets, the gain realized on the disposition;\n\t\t\t\t\td. The entity’s regular, periodic entity distributions;\n\t\t\t\t\te. The amount of money the entity has accumulated;\n\t\t\t\t\tf. The amount of money the entity has borrowed;\n\t\t\t\t\tg. The amount of money the entity has received from the sources described in §§ 64.2-1054, 64.2-1057, 64.2-1058, and 64.2-1059; and\n\t\t\t\t\th. The amount of money the entity has received from a source not otherwise described in this subdivision; and4\n\nAny other factor the fiduciary determines is relevant.G\n\nIf, after applying subsections C through F, a fiduciary determines that a part of an entity distribution is a capital distribution but is in doubt about the amount of the entity distribution that is a capital distribution, the fiduciary shall allocate to principal the amount of the entity distribution that is in doubt.H\n\nIf a fiduciary receives additional information about the application of this section to an entity distribution before the fiduciary has paid part of the entity distribution to a beneficiary, the fiduciary may consider the additional information before making the payment to the beneficiary and may change a decision to make the payment to the beneficiary.I\n\nIf a fiduciary receives additional information about the application of this section to an entity distribution after the fiduciary has paid part of the entity distribution to a beneficiary, the fiduciary is not required to change or recover the payment to the beneficiary but may consider that information in determining whether to exercise the power to adjust under § 64.2-1038.","order_by":null,"text":{"0":{"id":216768,"text":"As used in this section:\n\t\t\t“Capital distribution” means an entity distribution of money that is a (i) return of capital or (ii) distribution in total or partial liquidation of the entity.\n\t\t\t“Entity” means a corporation, partnership, limited liability company, regulated investment company, real estate investment trust, common trust fund, or any other organization or arrangement in which a fiduciary owns or holds an interest, whether or not the entity is a taxpayer for federal income tax purposes. “Entity” does not include (i) a trust or estate to which § 64.2-1049 applies, (ii) a business or other activity to which § 64.2-1050 applies that is not conducted by an entity described above, (iii) an asset-backed security, or (iv) an instrument or arrangement to which § 64.2-1063 applies.\n\t\t\t“Entity distribution” means a payment or transfer by an entity made to a person in the person’s capacity as an owner or holder of an interest in the entity.","type":"section","prefixes":["A"],"prefix":"A","entire_prefix":"A","prefix_anchor":"A","level":1,"next_prefix":"B"},"1":{"id":216769,"text":"In this section, an attribute or action of an entity includes an attribute or action of any other entity in which the entity owns or holds an interest, including an interest owned or held indirectly through another entity.","type":"section","prefixes":["B"],"prefix":"B","entire_prefix":"B","prefix_anchor":"B","level":1,"prior_prefix":"A","next_prefix":"C"},"2":{"id":216770,"text":"Except as otherwise provided in subdivisions D 2, 3, and 4, a fiduciary shall allocate to income:","type":"section","prefixes":["C"],"prefix":"C","entire_prefix":"C","prefix_anchor":"C","level":1,"prior_prefix":"B","next_prefix":"C1"},"3":{"id":216771,"text":"Money received in an entity distribution; and","type":"section","prefixes":["C","1"],"prefix":"1","entire_prefix":"C1","prefix_anchor":"C1","level":2,"prior_prefix":"C","next_prefix":"C2"},"4":{"id":216772,"text":"Tangible personal property of nominal value received from the entity.","type":"section","prefixes":["C","2"],"prefix":"2","entire_prefix":"C2","prefix_anchor":"C2","level":2,"prior_prefix":"C1","next_prefix":"D"},"5":{"id":216773,"text":"A fiduciary shall allocate to principal:","type":"section","prefixes":["D"],"prefix":"D","entire_prefix":"D","prefix_anchor":"D","level":1,"prior_prefix":"C2","next_prefix":"D1"},"6":{"id":216774,"text":"Property received in an entity distribution that is not:\n\t\t\t\ta. Money; or\n\t\t\t\tb. Tangible personal property of nominal value;","type":"section","prefixes":["D","1"],"prefix":"1","entire_prefix":"D1","prefix_anchor":"D1","level":2,"prior_prefix":"D","next_prefix":"D2"},"7":{"id":216775,"text":"Money received in an entity distribution in an exchange for part or all of the fiduciary’s interest in the entity, to the extent the entity distribution reduces the fiduciary’s interest in the entity relative to the interests of other persons that own or hold interests in the entity;","type":"section","prefixes":["D","2"],"prefix":"2","entire_prefix":"D2","prefix_anchor":"D2","level":2,"prior_prefix":"D1","next_prefix":"D3"},"8":{"id":216776,"text":"Money received in an entity distribution that the fiduciary determines or estimates is a capital distribution; and","type":"section","prefixes":["D","3"],"prefix":"3","entire_prefix":"D3","prefix_anchor":"D3","level":2,"prior_prefix":"D2","next_prefix":"D4"},"9":{"id":216777,"text":"Money received in an entity distribution from an entity that is:\n\t\t\t\ta. A regulated investment company or real estate investment trust if the money received is a capital gain dividend for federal income tax purposes; or\n\t\t\t\tb. Treated for federal income tax purposes comparably to the treatment described in subdivision a.","type":"section","prefixes":["D","4"],"prefix":"4","entire_prefix":"D4","prefix_anchor":"D4","level":2,"prior_prefix":"D3","next_prefix":"E"},"10":{"id":216778,"text":"A fiduciary may determine or estimate that money received in an entity distribution is a capital distribution:","type":"section","prefixes":["E"],"prefix":"E","entire_prefix":"E","prefix_anchor":"E","level":1,"prior_prefix":"D4","next_prefix":"E1"},"11":{"id":216779,"text":"By relying without inquiry or investigation on a characterization of the entity distribution provided by or on behalf of the entity, unless the fiduciary:\n\t\t\t\ta. Determines, on the basis of information known to the fiduciary, that the characterization is or may be incorrect; or\n\t\t\t\tb. Owns or holds more than 50 percent of the voting interest in the entity;","type":"section","prefixes":["E","1"],"prefix":"1","entire_prefix":"E1","prefix_anchor":"E1","level":2,"prior_prefix":"E","next_prefix":"E2"},"12":{"id":216780,"text":"By determining or estimating, on the basis of information known to the fiduciary or provided to the fiduciary by or on behalf of the entity, that the total amount of money and property received by the fiduciary in the entity distribution or a series of related entity distributions is or will be greater than 20 percent of the fair market value of the fiduciary’s interest in the entity; or","type":"section","prefixes":["E","2"],"prefix":"2","entire_prefix":"E2","prefix_anchor":"E2","level":2,"prior_prefix":"E1","next_prefix":"E3"},"13":{"id":216781,"text":"If neither subdivision 1 nor 2 applies, by considering the factors in subsection F and the information known to the fiduciary or provided to the fiduciary by or on behalf of the entity.","type":"section","prefixes":["E","3"],"prefix":"3","entire_prefix":"E3","prefix_anchor":"E3","level":2,"prior_prefix":"E2","next_prefix":"F"},"14":{"id":216782,"text":"In making a determination or estimate under subdivision E 3, a fiduciary may consider:","type":"section","prefixes":["F"],"prefix":"F","entire_prefix":"F","prefix_anchor":"F","level":1,"prior_prefix":"E3","next_prefix":"F1"},"15":{"id":216783,"text":"A characterization of an entity distribution provided by or on behalf of the entity;","type":"section","prefixes":["F","1"],"prefix":"1","entire_prefix":"F1","prefix_anchor":"F1","level":2,"prior_prefix":"F","next_prefix":"F2"},"16":{"id":216784,"text":"The amount of money or property received in:\n\t\t\t\ta. The entity distribution; or\n\t\t\t\tb. What the fiduciary determines is or will be a series of related entity distributions;","type":"section","prefixes":["F","2"],"prefix":"2","entire_prefix":"F2","prefix_anchor":"F2","level":2,"prior_prefix":"F1","next_prefix":"F3"},"17":{"id":216785,"text":"The amount described in subdivision 2 compared to the amount the fiduciary determines or estimates is, during the current or preceding accounting periods:\n\t\t\t\ta. The entity’s operating income;\n\t\t\t\tb. The proceeds of the entity’s sale or other disposition of:","type":"section","prefixes":["F","3"],"prefix":"3","entire_prefix":"F3","prefix_anchor":"F3","level":2,"prior_prefix":"F2","next_prefix":"F31"},"18":{"id":216786,"text":"All or part of the business or other activity conducted by the entity;","type":"section","prefixes":["F","3","1"],"prefix":"1","entire_prefix":"F31","prefix_anchor":"F31","level":3,"prior_prefix":"F3","next_prefix":"F32"},"19":{"id":216787,"text":"One or more business assets that are not sold to customers in the ordinary course of the business or other activity conducted by the entity; or","type":"section","prefixes":["F","3","2"],"prefix":"2","entire_prefix":"F32","prefix_anchor":"F32","level":3,"prior_prefix":"F31","next_prefix":"F33"},"20":{"id":216788,"text":"One or more assets other than business assets, unless the entity’s primary activity is to invest in assets to realize gain on the disposition of all or some of the assets;\n\t\t\t\t\tc. If the entity’s primary activity is to invest in assets to realize gain on the disposition of all or some of the assets, the gain realized on the disposition;\n\t\t\t\t\td. The entity’s regular, periodic entity distributions;\n\t\t\t\t\te. The amount of money the entity has accumulated;\n\t\t\t\t\tf. The amount of money the entity has borrowed;\n\t\t\t\t\tg. The amount of money the entity has received from the sources described in §§ 64.2-1054, 64.2-1057, 64.2-1058, and 64.2-1059; and\n\t\t\t\t\th. The amount of money the entity has received from a source not otherwise described in this subdivision; and","type":"section","prefixes":["F","3","3"],"prefix":"3","entire_prefix":"F33","prefix_anchor":"F33","level":3,"prior_prefix":"F32","next_prefix":"F4"},"21":{"id":216789,"text":"Any other factor the fiduciary determines is relevant.","type":"section","prefixes":["F","4"],"prefix":"4","entire_prefix":"F4","prefix_anchor":"F4","level":2,"prior_prefix":"F33","next_prefix":"G"},"22":{"id":216790,"text":"If, after applying subsections C through F, a fiduciary determines that a part of an entity distribution is a capital distribution but is in doubt about the amount of the entity distribution that is a capital distribution, the fiduciary shall allocate to principal the amount of the entity distribution that is in doubt.","type":"section","prefixes":["G"],"prefix":"G","entire_prefix":"G","prefix_anchor":"G","level":1,"prior_prefix":"F4","next_prefix":"H"},"23":{"id":216791,"text":"If a fiduciary receives additional information about the application of this section to an entity distribution before the fiduciary has paid part of the entity distribution to a beneficiary, the fiduciary may consider the additional information before making the payment to the beneficiary and may change a decision to make the payment to the beneficiary.","type":"section","prefixes":["H"],"prefix":"H","entire_prefix":"H","prefix_anchor":"H","level":1,"prior_prefix":"G","next_prefix":"I"},"24":{"id":216792,"text":"If a fiduciary receives additional information about the application of this section to an entity distribution after the fiduciary has paid part of the entity distribution to a beneficiary, the fiduciary is not required to change or recover the payment to the beneficiary but may consider that information in determining whether to exercise the power to adjust under § 64.2-1038.","type":"section","prefixes":["I"],"prefix":"I","entire_prefix":"I","prefix_anchor":"I","level":1,"prior_prefix":"H"}},"ancestry":[{"id":15510,"edition_id":1,"name":"Allocation of Receipts: Receipts from Entity","identifier":"4","label":"article","depth":4,"order_by":1,"parent_id":13478,"metadata":{},"date_created":"2026-06-26 03:55:40","date_modified":"2026-06-26 03:55:40","permalink":{"id":273945,"object_type":"structure","relational_id":15510,"identifier":"4","token":"64.2\/III\/10.1\/4","url":"\/64.2\/III\/10.1\/4\/","edition_id":1,"permalink":0,"preferred":1}},{"id":13478,"edition_id":1,"name":"Uniform Fiduciary Income And Principal Act","identifier":"10.1","label":"chapter","depth":3,"order_by":1,"parent_id":12724,"metadata":{},"date_created":"2026-06-26 03:44:58","date_modified":"2026-06-26 03:44:58","permalink":{"id":273863,"object_type":"structure","relational_id":13478,"identifier":"10.1","token":"64.2\/III\/10.1","url":"\/64.2\/III\/10.1\/","edition_id":1,"permalink":0,"preferred":1}},{"id":12724,"edition_id":1,"name":"Trusts","identifier":"III","label":"subtitle","depth":2,"order_by":1,"parent_id":12723,"metadata":{},"date_created":"2026-06-26 03:43:50","date_modified":"2026-06-26 03:43:50","permalink":{"id":273811,"object_type":"structure","relational_id":12724,"identifier":"III","token":"64.2\/III","url":"\/64.2\/III\/","edition_id":1,"permalink":0,"preferred":1}},{"id":12723,"edition_id":1,"name":"Wills, Trusts, and Fiduciaries","identifier":"64.2","label":"title","depth":1,"order_by":1,"parent_id":null,"metadata":{},"date_created":"2026-06-26 03:43:50","date_modified":"2026-06-26 03:43:50","permalink":{"id":272781,"object_type":"structure","relational_id":12723,"identifier":"64.2","token":"64.2","url":"\/64.2\/","edition_id":1,"permalink":0,"preferred":1}}],"structure_contents":[{"id":59116,"structure_id":15510,"section_number":"64.2-1048","catch_line":"Character of receipts from entity","url":"\/64.2-1048\/","token":"64.2\/III\/10.1\/4\/64.2-1048","metadata":false},{"id":80790,"structure_id":15510,"section_number":"64.2-1049","catch_line":"Distribution from trust or estate","url":"\/64.2-1049\/","token":"64.2\/III\/10.1\/4\/64.2-1049","metadata":false},{"id":60866,"structure_id":15510,"section_number":"64.2-1050","catch_line":"Business or other activity conducted by fiduciary","url":"\/64.2-1050\/","token":"64.2\/III\/10.1\/4\/64.2-1050","metadata":false}],"next_section":{"id":80790,"structure_id":15510,"section_number":"64.2-1049","catch_line":"Distribution from trust or estate","url":"\/64.2-1049\/","token":"64.2\/III\/10.1\/4\/64.2-1049","metadata":false},"metadata":false,"official_url":"https:\/\/law.lis.virginia.gov\/vacode\/64.2-1048\/","history_text":"

This law was first created in 2022. The record of its establishment is cataloged in chapter 354<\/a> of that year\u2019s edition of \u201cActs of Assembly,\u201d the annual state publication listing all changes made to the Code of Virginia in that year.<\/p>","references":[{"id":81918,"section_number":"64.2-1033","catch_line":"Definitions","order_by":null,"url":"\/64.2-1033\/"},{"id":79031,"section_number":"64.2-1036","catch_line":"Fiduciary duties; general principles","order_by":null,"url":"\/64.2-1036\/"},{"id":80594,"section_number":"64.2-1038","catch_line":"Fiduciary's power to adjust","order_by":null,"url":"\/64.2-1038\/"},{"id":80790,"section_number":"64.2-1049","catch_line":"Distribution from trust or estate","order_by":null,"url":"\/64.2-1049\/"},{"id":70724,"section_number":"64.2-1057","catch_line":"Liquidating asset","order_by":null,"url":"\/64.2-1057\/"},{"id":68355,"section_number":"64.2-1071","catch_line":"Determination and distribution of net income","order_by":null,"url":"\/64.2-1071\/"},{"id":58195,"section_number":"64.2-1074","catch_line":"Apportionment of receipts and disbursements when decedent dies or income interest begins","order_by":null,"url":"\/64.2-1074\/"}],"refers_to":[{"id":80594,"section_number":"64.2-1038","catch_line":"Fiduciary's power to adjust","order_by":null,"url":"\/64.2-1038\/"},{"id":80790,"section_number":"64.2-1049","catch_line":"Distribution from trust or estate","order_by":null,"url":"\/64.2-1049\/"},{"id":60866,"section_number":"64.2-1050","catch_line":"Business or other activity conducted by fiduciary","order_by":null,"url":"\/64.2-1050\/"},{"id":54443,"section_number":"64.2-1054","catch_line":"Insurance policy or contract","order_by":null,"url":"\/64.2-1054\/"},{"id":70724,"section_number":"64.2-1057","catch_line":"Liquidating asset","order_by":null,"url":"\/64.2-1057\/"},{"id":64796,"section_number":"64.2-1058","catch_line":"Minerals, water, and other natural resources","order_by":null,"url":"\/64.2-1058\/"},{"id":59724,"section_number":"64.2-1059","catch_line":"Timber","order_by":null,"url":"\/64.2-1059\/"},{"id":72779,"section_number":"64.2-1063","catch_line":"Other financial instrument or arrangement","order_by":null,"url":"\/64.2-1063\/"}],"permalink":{"id":273947,"object_type":"law","relational_id":59116,"identifier":"64.2-1048","token":"64.2\/III\/10.1\/4\/64.2-1048","url":"\/64.2-1048\/","edition_id":1,"permalink":0,"preferred":1},"url":"\/64.2-1048\/","token":"64.2\/III\/10.1\/4\/64.2-1048","dublin_core":{"Title":"Character of receipts from entity","Type":"Text","Format":"text\/html","Identifier":"\u00a7 64.2-1048","Relation":"Code of Virginia"},"html":"\n\t\t\t\t\t\t

A.<\/span> As used in this section:\n\t\t\t“Capital distribution<\/span>” means an entity distribution<\/span> of money that is a (i) return of capital or (ii) distribution in total or partial liquidation<\/span> of the entity.\n\t\t\t“Entity” means a corporation, partnership, limited liability company, regulated investment company, real estate<\/span> investment trust<\/span>, common trust<\/span> fund, or any other organization or arrangement in which a fiduciary<\/span> owns or holds an interest, whether or not the entity is a taxpayer for federal income<\/span> tax purposes. “Entity” does not include (i) a trust<\/span> or estate<\/span> to which § 64.2-1049<\/a> applies, (ii) a business or other activity to which § 64.2-1050<\/a> applies that is not conducted by an entity described above, (iii) an asset-backed security<\/span>, or (iv) an instrument or arrangement to which § 64.2-1063<\/a> applies.\n\t\t\t“Entity distribution<\/span>” means a payment or transfer by an entity made to a person<\/span> in the person<\/span>’s capacity as an owner or holder of an interest in the entity. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

B.<\/span> In this section, an attribute or action of an entity includes an attribute or action of any other entity in which the entity owns or holds an interest, including an interest owned or held indirectly through another entity. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

C.<\/span> Except as otherwise provided in subdivisions D 2, 3, and 4, a fiduciary<\/span> shall allocate to income<\/span>: <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

1.<\/span> Money received in an entity distribution<\/span>; and <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

2.<\/span> Tangible personal property of nominal value<\/span> received from the entity. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

D.<\/span> A fiduciary<\/span> shall allocate to principal<\/span>: <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

1.<\/span> Property received in an entity distribution<\/span> that is not:\n\t\t\t\ta. Money; or\n\t\t\t\tb. Tangible personal property of nominal value<\/span>; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

2.<\/span> Money received in an entity distribution<\/span> in an exchange for part or all of the fiduciary<\/span>’s interest in the entity, to the extent the entity distribution<\/span> reduces the fiduciary<\/span>’s interest in the entity relative to the interests of other persons<\/span> that own or hold interests in the entity; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

3.<\/span> Money received in an entity distribution<\/span> that the fiduciary<\/span> determines or estimates is a capital distribution<\/span>; and <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

4.<\/span> Money received in an entity distribution<\/span> from an entity that is:\n\t\t\t\ta. A regulated investment company or real estate<\/span> investment trust<\/span> if the money received is a capital gain dividend for federal income<\/span> tax purposes; or\n\t\t\t\tb. Treated for federal income<\/span> tax purposes comparably to the treatment described in subdivision a. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

E.<\/span> A fiduciary<\/span> may determine or estimate that money received in an entity distribution<\/span> is a capital distribution<\/span>: <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

1.<\/span> By relying without inquiry or investigation on a characterization of the entity distribution<\/span> provided by or on behalf of the entity, unless the fiduciary<\/span>:\n\t\t\t\ta. Determines, on the basis of information known to the fiduciary<\/span>, that the characterization is or may be incorrect; or\n\t\t\t\tb. Owns or holds more than 50 percent of the voting interest in the entity; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

2.<\/span> By determining or estimating, on the basis of information known to the fiduciary<\/span> or provided to the fiduciary<\/span> by or on behalf of the entity, that the total amount of money and property received by the fiduciary<\/span> in the entity distribution<\/span> or a series of related entity distributions<\/span> is or will<\/span> be greater than 20 percent of the fair market value<\/span> of the fiduciary<\/span>’s interest in the entity; or <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

3.<\/span> If neither subdivision 1 nor 2 applies, by considering the factors in subsection F and the information known to the fiduciary<\/span> or provided to the fiduciary<\/span> by or on behalf of the entity. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

F.<\/span> In making a determination or estimate under subdivision E 3, a fiduciary<\/span> may consider: <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

1.<\/span> A characterization of an entity distribution<\/span> provided by or on behalf of the entity; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

2.<\/span> The amount of money or property received in:\n\t\t\t\ta. The entity distribution<\/span>; or\n\t\t\t\tb. What the fiduciary<\/span> determines is or will<\/span> be a series of related entity distributions<\/span>; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

3.<\/span> The amount described in subdivision 2 compared to the amount the fiduciary<\/span> determines or estimates is, during the current or preceding accounting periods<\/span>:\n\t\t\t\ta. The entity’s operating income<\/span>;\n\t\t\t\tb. The proceeds of the entity’s sale or other disposition<\/span> of: <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

1.<\/span> All or part of the business or other activity conducted by the entity; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

2.<\/span> One or more business assets<\/span> that are not sold to customers in the ordinary course of the business or other activity conducted by the entity; or <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

3.<\/span> One or more assets<\/span> other than business assets<\/span>, unless the entity’s primary activity is to invest in assets<\/span> to realize gain on the disposition<\/span> of all or some of the assets<\/span>;\n\t\t\t\t\tc. If the entity’s primary activity is to invest in assets<\/span> to realize gain on the disposition<\/span> of all or some of the assets<\/span>, the gain realized on the disposition<\/span>;\n\t\t\t\t\td. The entity’s regular, periodic entity distributions<\/span>;\n\t\t\t\t\te. The amount of money the entity has accumulated;\n\t\t\t\t\tf. The amount of money the entity has borrowed;\n\t\t\t\t\tg. The amount of money the entity has received from the sources described in §§ 64.2-1054<\/a>, 64.2-1057<\/a>, 64.2-1058<\/a>, and 64.2-1059<\/a>; and\n\t\t\t\t\th. The amount of money the entity has received from a source not otherwise described in this subdivision; and <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

4.<\/span> Any other factor the fiduciary<\/span> determines is relevant. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

G.<\/span> If, after applying subsections C through F, a fiduciary<\/span> determines that a part of an entity distribution<\/span> is a capital distribution<\/span> but is in doubt about the amount of the entity distribution<\/span> that is a capital distribution<\/span>, the fiduciary<\/span> shall allocate to principal<\/span> the amount of the entity distribution<\/span> that is in doubt. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

H.<\/span> If a fiduciary<\/span> receives additional information about the application of this section to an entity distribution<\/span> before the fiduciary<\/span> has paid part of the entity distribution<\/span> to a beneficiary, the fiduciary<\/span> may consider the additional information before making the payment to the beneficiary and may change a decision to make the payment to the beneficiary. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

I.<\/span> If a fiduciary<\/span> receives additional information about the application of this section to an entity distribution<\/span> after the fiduciary<\/span> has paid part of the entity distribution<\/span> to a beneficiary, the fiduciary<\/span> is not required to change or recover the payment to the beneficiary but may consider that information in determining whether to exercise the power to adjust under § 64.2-1038<\/a>. <\/i><\/a><\/p><\/section>","plain_text":" CODE OF VIRGINIA\n\nCHARACTER OF RECEIPTS FROM ENTITY (\u00a7 64.2-1048)\n\nA. As used in this section:\n\t\t\t“Capital distribution” means an entity distribution of money that\nis a (i) return of capital or (ii) distribution in total or partial liquidation\nof the entity.\n\t\t\t“Entity” means a corporation, partnership, limited liability\ncompany, regulated investment company, real estate investment trust, common\ntrust fund, or any other organization or arrangement in which a fiduciary owns\nor holds an interest, whether or not the entity is a taxpayer for federal income\ntax purposes. “Entity” does not include (i) a trust or estate to\nwhich § 64.2-1049 applies, (ii) a business or other activity to which\n§ 64.2-1050 applies that is not conducted by an entity described above,\n(iii) an asset-backed security, or (iv) an instrument or arrangement to which\n§ 64.2-1063 applies.\n\t\t\t“Entity distribution” means a payment or transfer by an entity\nmade to a person in the person’s capacity as an owner or holder of an\ninterest in the entity.\n\nB. In this section, an attribute or action of an entity includes an attribute or\naction of any other entity in which the entity owns or holds an interest,\nincluding an interest owned or held indirectly through another entity.\n\nC. Except as otherwise provided in subdivisions D 2, 3, and 4, a fiduciary shall\nallocate to income:\n\n 1. Money received in an entity distribution; and\n\n 2. Tangible personal property of nominal value received from the entity.\n\nD. A fiduciary shall allocate to principal:\n\n 1. Property received in an entity distribution that is not:\n \t\t\t\ta. Money; or\n \t\t\t\tb. Tangible personal property of nominal value;\n\n 2. Money received in an entity distribution in an exchange for part or all of\n the fiduciary’s interest in the entity, to the extent the entity\n distribution reduces the fiduciary’s interest in the entity relative to\n the interests of other persons that own or hold interests in the entity;\n\n 3. Money received in an entity distribution that the fiduciary determines or\n estimates is a capital distribution; and\n\n 4. Money received in an entity distribution from an entity that is:\n \t\t\t\ta. A regulated investment company or real estate investment trust if the\n money received is a capital gain dividend for federal income tax purposes; or\n \t\t\t\tb. Treated for federal income tax purposes comparably to the treatment\n described in subdivision a.\n\nE. A fiduciary may determine or estimate that money received in an entity\ndistribution is a capital distribution:\n\n 1. By relying without inquiry or investigation on a characterization of the\n entity distribution provided by or on behalf of the entity, unless the\n fiduciary:\n \t\t\t\ta. Determines, on the basis of information known to the fiduciary, that\n the characterization is or may be incorrect; or\n \t\t\t\tb. Owns or holds more than 50 percent of the voting interest in the\n entity;\n\n 2. By determining or estimating, on the basis of information known to the\n fiduciary or provided to the fiduciary by or on behalf of the entity, that the\n total amount of money and property received by the fiduciary in the entity\n distribution or a series of related entity distributions is or will be greater\n than 20 percent of the fair market value of the fiduciary’s interest in\n the entity; or\n\n 3. If neither subdivision 1 nor 2 applies, by considering the factors in\n subsection F and the information known to the fiduciary or provided to the\n fiduciary by or on behalf of the entity.\n\nF. In making a determination or estimate under subdivision E 3, a fiduciary may\nconsider:\n\n 1. A characterization of an entity distribution provided by or on behalf of\n the entity;\n\n 2. The amount of money or property received in:\n \t\t\t\ta. The entity distribution; or\n \t\t\t\tb. What the fiduciary determines is or will be a series of related entity\n distributions;\n\n 3. The amount described in subdivision 2 compared to the amount the fiduciary\n determines or estimates is, during the current or preceding accounting\n periods:\n \t\t\t\ta. The entity’s operating income;\n \t\t\t\tb. The proceeds of the entity’s sale or other disposition of:\n\n 1. All or part of the business or other activity conducted by the entity;\n\n 2. One or more business assets that are not sold to customers in the\n ordinary course of the business or other activity conducted by the entity;\n or\n\n 3. One or more assets other than business assets, unless the entity’s\n primary activity is to invest in assets to realize gain on the disposition\n of all or some of the assets;\n \t\t\t\t\tc. If the entity’s primary activity is to invest in assets to\n realize gain on the disposition of all or some of the assets, the gain\n realized on the disposition;\n \t\t\t\t\td. The entity’s regular, periodic entity distributions;\n \t\t\t\t\te. The amount of money the entity has accumulated;\n \t\t\t\t\tf. The amount of money the entity has borrowed;\n \t\t\t\t\tg. The amount of money the entity has received from the sources\n described in §§ 64.2-1054, 64.2-1057, 64.2-1058, and 64.2-1059;\n and\n \t\t\t\t\th. The amount of money the entity has received from a source not\n otherwise described in this subdivision; and\n\n 4. Any other factor the fiduciary determines is relevant.\n\nG. If, after applying subsections C through F, a fiduciary determines that a\npart of an entity distribution is a capital distribution but is in doubt about\nthe amount of the entity distribution that is a capital distribution, the\nfiduciary shall allocate to principal the amount of the entity distribution that\nis in doubt.\n\nH. If a fiduciary receives additional information about the application of this\nsection to an entity distribution before the fiduciary has paid part of the\nentity distribution to a beneficiary, the fiduciary may consider the additional\ninformation before making the payment to the beneficiary and may change a\ndecision to make the payment to the beneficiary.\n\nI. If a fiduciary receives additional information about the application of this\nsection to an entity distribution after the fiduciary has paid part of the\nentity distribution to a beneficiary, the fiduciary is not required to change or\nrecover the payment to the beneficiary but may consider that information in\ndetermining whether to exercise the power to adjust under § 64.2-1038.\n\nHISTORY: 2022, c. 354.","edition":{"id":1,"name":"2025","slug":"2025","date_created":"2026-06-21 22:39:22","date_modified":"2026-06-21 22:39:22","current":1,"order_by":1,"last_import":null}}