637.426 Derivatives and options. 1. For purposes of this section, 'derivative' means a contract or financial instrument or a combination of contracts and financial instruments which gives a trust the right or obligationto participate in some or all changes in the price of a tangible or intangible asset or group ofassets, or changes in a rate, an index of prices or rates, or other market indicator for an assetor a group of assets. 2. To the extent that a trustee does not account under section 637.403 for transactions in derivatives, receipts from and disbursements made in connection with those transactionsmust be allocated to principal. 3. If a trustee grants an option to buy property from the trust, whether or not the trust owns the property when the option is granted, grants an option that permits another personto sell property to the trust, or acquires an option to buy property for the trust or an optionto sell an asset owned by the trust, and the trustee or other owner of the asset is required todeliver the asset if the option is exercised, an amount received for granting the option must beallocated to principal, and an amount paid to acquire the option must be paid from asset is required todeliver the asset if the option is exercised, an amount received for granting the option must beallocated to principal, and an amount paid to acquire the option must be paid from principal.A gain or loss realized upon the exercise of an option, including an option granted to a settlorof the trust for services rendered, must be allocated to principal. 99 Acts, ch 124, §22Referred to in §637.403, 637.412, 637.422 Sat Dec 23 12:19:18 2023 Iowa Code 2024, Section 637.426 (16, 0)
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