Indiana Code Title 30. Trusts and Fiduciaries § 30-2-14-28

Sec. 28. (a) An amount received as interest, whether determined at a fixed, variable, or floating rate, on an obligation to pay money to the trustee, including an amount received as consideration for prepaying principal, must be allocated to income without any provision for amortization of premium.

(b) A trustee shall allocate to principal an amount received from the sale, redemption, or other disposition of an obligation to pay money to the trustee more than one (1) year after it is purchased or acquired by the trustee, including an obligation whose purchase price or value when it is acquired is less than its value at maturity.  If the obligation matures within one (1) year after it is purchased or acquired by the trustee, an amount received in excess of its purchase price or its value when acquired by the trust must be allocated to income.

(c) Notwithstanding any other provision of this section, when an obligation described in this section is held as an asset of a charitable remainder trust, an increase in the value of the obligation over the value of the obligation at the time of acquisition by the trust is distributable as income.  For purposes of this subsection, the increase in value is available for distribution only when the trustee receives cash on account of the obligation.  If the obligation is surrendered or liquidated partially, the cash available shall be attributed first to the increase.  The increase is distributable to the income beneficiary who is the income beneficiary at the time the cash is received.

(d) This section does not apply to an obligation to which section 31, 32, 33, 34, 36, or 37 of this chapter applies.