CHAPTER 506

An Act to amend and reenact § 55-257 of the Code of Virginia, relating
to corporate dividends and share rights under the Uniform Principal
and Income Act.

[H 686]
Approved April 4, 1966

Be it enacted by the General Assembly of Virginia:

0 That § 55-257 of the Code of Virginia be amended and reenacted as
ollows:

§ 55-257. (1) All dividends on shares of a corporation forming a
part of the principal which are payable in the shares of the corporation
shall be deemed principal. Subject to the provisions of this section, all
dividends payable otherwise than in the shares of the corporation itself,
including ordinary and extraordinary dividends and dividends payable in
shares or other securities or obligations of corporations other than the
declaring corporation, shall be deemed income. When the trustee shall have
the option of receiving a dividend either in cash or in the shares of the
declaring corporation, it shall be considered as a cash dividend and deemed
income, irrespective of the choice made by the trustee.

_ (2) All rights to subscribe to the shares or other securities or obliga-
tions of a corporation accruing on account of the ownership of shares or
other securities in such corporation, and the proceeds of any sale of such
rights, shall be deemed principal. All rights to subscribe to the shares or
other securities or obligations of a corporation accruing on account of the
ownership of shares or other securities in another corporation, and the
proceeds of any sale of such rights, shall be deemed income.
(8) When the assets of a corporation are liquidated, amounts paid
upon corporate shares as cash dividends declared before such liquidation
occurred or as arrears of preferred or guaranteed dividends shall
deemed income; all other amounts paid upon corporate shares on disburse-
ment of the corporate assets to the stockholders shall be deemed principal.
All disbursements of corporate assets to the stockholders, whenever made,
which are designated by the corporation as a return of capital or division
of corporate property shall be deemed principal. ae

(4) When a corporation succeeds another by merger, consolidation or
reorganization or otherwise acquires its assets and the corporate shares of
the succeeding corporation are issued to the shareholders of the original
corporation in like proportion to, or in substitution for, their shares of the
original corporation, the two corporations shall be considered a single
corporation in applying the provisions of this section. But two corporations
shall not be considered as a single corporation under this section merely
ages one owns corporate shares of or otherwise controls or directs the
other.

(5) In applying this section the date when a dividend accrues to the
person who is entitled to it shall be held to be the date specified by the
corporation as the one on which the stockholders entitled thereto are deter-
mined, or in default thereof, the date of declaration of the dividend. |

(6) Distributions made from ordinary income by a regulated invest-
ment company or by a trust qualifying and electing to be taxed under
federal law as a real estate investment trust are income. All other distribu-
tions made by the company or trust, including distributions from capital
gains, depreciation, or depletion, whether in the form of cash or an option
to take new stock or cash or an option to purchase additional shares, are