Illinois Code § 7

§ 7.

Corporate Distributions. (a) Corporate distributions of shares of the distributing corporation, including distributions in the form of a stock split or stock dividend, are principal. A right to subscribe to shares or other securities issued by the distributing corporation accruing on account of the ownership of shares or other securities in such corporation and the proceeds of any sale of the right are principal. (b) Except to the extent that the corporation indicates that some part of a corporate distribution is a settlement of preferred or guaranteed dividends accrued since the trustee became a stockholder or is in lieu of an ordinary cash dividend, a corporate distribution is principal if the distribution is pursuant to: (1) a call of shares; (2) a merger, consolidation or reorganization; (3) a plan by which assets of the corporation are acquired by another corporation; or (4) a total or partial liquidation of the corporation, including (a) any distribution which the corporation indicates is a distribution in total or partial liquidation or (b) any distribution of assets, pursuant to the judgment of a court or final administrative order by a government agency ordering distribution of the particular assets. (c) Distributions made from ordinary income by a regulated investment company or by a trust qualifying and electing to be taxed under federal law as a real estate investment trust are income. All other distributions 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 principal. (d) Except as provided in subsections (a), (b) and (c), all corporate distributions are income, including cash dividends, distributions of or rights to subscribe to shares or securities or obligations of corporations other than the distributing corporation, and the proceeds of the rights or property distributions. Except as provided in subsections (b) and (c), if the distributing corporation gives a stockholder an option to receive a distribution either in cash or in its own shares, the distribution chosen is income. (e) The trustee may rely upon any statement of the distributing corporation as to any fact relevant under any provision of this Act concerning the source or character of dividends or distributions of corporate assets. (Source: P.A. 84-545.)