Where any part of the principal consists of property subject to depletion, such as leaseholds, patents, copyrights, and royalty rights, and the tenant in possession is not under a duty to change the form of the investment of the principal, the full amount of rents, royalties, or income from the property shall be income to the tenant; but where the tenant is under a duty to change the form of the investment, either at once or as soon as a reasonable price, not representing an undue sacrifice of value, may be obtained, then the rents, royalties or income from such property not in excess of 5 percent per annum of its inventory value as fixed by the appraiser or appraisers regularly appointed by the court, or in default thereof its market value at the time the principal was established or at its cost where purchased later, shall be deemed income and the remainder principal.

(Added by Stats. 1968, Ch. 193.)

Terms Used In California Civil Code 731.12

  • Income: as used in this chapter means the return derived from principal. See California Civil Code 731.03
  • Principal: as used in this chapter means any realty or personalty which has been so set aside or limited by the owner thereof or a person thereto legally empowered that it and any substitutions for it are eventually to be conveyed, delivered, or paid to a person, while the return therefrom or use thereof or any part of such return or use is in the meantime to be taken or received by or held for accumulation for the same or another person. See California Civil Code 731.03
  • property: includes property real and personal. See California Civil Code 14
  • Remainder: An interest in property that takes effect in the future at a specified time or after the occurrence of some event, such as the death of a life tenant.
  • Tenant: as used in this chapter means the person to whom income is presently or currently payable, or for whom it is accumulated or who is entitled to the beneficial use of the principal presently and for a time prior to its distribution. See California Civil Code 731.03
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