Mississippi Principal and Income Act of 2013; revise provisions relating to partial liquidation.

New trust rules for liquidation payouts

Starting July 1, 2025, trustees generally count money received from an entity as trust income. Some receipts instead go to principal, including noncash property, money received for giving up part or all of the trust’s interest, liquidation proceeds, and certain capital-gain dividends. A distribution counts as a partial liquidation when the entity identifies it as one or when all owners receive money and property worth more than 20% of the entity’s assets. Assets are measured as cash plus the adjusted bases of other property, using the year-end statements before the first receipt. For a qualifying partial liquidation, the trustee moves enough from principal to income to reimburse the trustee or beneficiary for related federal and state income taxes. Trustees may rely on a distribution statement provided near the payment by the entity’s authorized representative.