This section simply states the name of the chapter, which is the Legal Estates Principal and Income Law.

This law section explains the rules for transactions that create a principal without setting up a trust, starting from September 13, 1941. If a principal is held within a trust, different rules apply from another part of the law.

This section defines key terms used in legal matters around property or assets. 'Principal' refers to property or assets that are set aside to eventually be given to someone else, with any income from it used by someone else in the meantime. 'Income' is simply the money made from that principal. A 'Tenant' is the person who currently receives or is entitled to the income from the principal, while the 'Remainderman' is the person who will eventually own the principal itself.

This law explains how to divide income and expenses between two groups: tenants (temporary beneficiaries) and remaindermen (the people who will benefit later) when there is no trust involved. It allows the person who creates this fund or asset to decide how the money is divided up. They can also give someone else the power to make these decisions. As long as the decisions are made in good faith and thoughtfully, they are valid even if a court might decide differently.

This law section explains how different types of money or property should be classified for financial management purposes. If you're receiving rent from property, income from loans, or dividends, it's generally considered income unless noted otherwise. If you sell property, repay loans, or receive insurance payouts, that's usually considered principal. There are specific rules for cases involving certain property types detailed in another section. Income, after covering expenses, goes to the tenant, but the principal is held for future distribution as specified by the original terms or the law.

If a tenant who is entitled to income under a financial agreement dies or their right to income ends in another way, any income they received before that time remains theirs or goes to their personal representative. Any income received after their right ends should go to the next person entitled to it according to the original agreement.

This law explains how to classify different types of dividends and corporate distributions for financial purposes. It states that dividends paid in the same kind of shares are considered part of the main capital (or principal), while most other dividends are considered income. If shareholders have an option to receive dividends as cash or shares, they're treated as cash dividends (income), unless stated otherwise. Rights to subscribe to new shares generally count as principal, while those from another corporation count as income. Dividends declared before a company's liquidation are income, while most other liquidation payouts are principal. If one company takes over another and issues new shares, those corporations are treated as one. Also, specific rules exist for distributions from investment companies or real estate trusts. Lastly, tenants can trust the corporation's statements about whether dividends are earnings or returns of capital.

If you have bonds or similar financial obligations as part of an estate, they are valued based on their inventory price set by the court's appraiser, their market value at the start, or their purchase cost. When these bonds mature, are sold, or otherwise dealt with, any gain or loss affects the estate's principal value, unless they're covered by another specific law (Section 731.14). For bonds without interest that increase in value over time, the extra value goes to income when realized.

This section addresses how profits are treated when a tenant is authorized to continue a business using the original owner's assets. The profits generated from these assets are considered income. For businesses that buy and sell property, you determine profits by calculating the difference in inventory and expenses. For other businesses, profits are determined by usual practices, but they cannot reduce the original assets (principal). If the value of the original assets increases, that increase stays as principal. Any losses in a year are covered by the principal after income is depleted.

This law explains what happens to the offspring or increase of animals that are part of a business or an asset. If animals produce offspring, those offspring are considered a part of the main asset if they are needed to keep the original number of animals. Any extra offspring not needed for this purpose is considered income. This rule applies when animals are held partly or entirely because of the offspring or increase they are expected to produce.

This law deals with how profits from natural resources like timber, minerals, oils, or gas are handled when the resources are part of a property investment (the principal). If the property owner or tenant is allowed to lease or develop these resources and no specific instructions are given on handling profits, these profits are considered income. If specific conditions aren't met, profits above 5% of the property's value when it was acquired remain part of the principal. The law also clarifies that it doesn't change any pre-existing rights a tenant might have to use these resources for themselves.

This legal rule explains how income from properties like leaseholds, patents, or royalties should be handled by a tenant. If the tenant doesn't need to sell or change these investments, they get all the income from them. However, if they are supposed to sell or change them, they only get to keep income up to a certain amount (5% of the property's value), and any extra goes towards the property's overall value.

This law section deals with how the income from a property, which hasn't generated much income for a year, should be handled when the property is ultimately sold. If a tenant is responsible for selling such a property but delays the sale until a reasonable price can be achieved, any extra income made from the sale, compared to expected earnings had the money been invested at 5% interest, is considered 'delayed income.' However, this delayed income can't exceed the difference between the sale price and the property's initial appraised or market value. This section also explains how delayed income should be dealt with between successive tenants or with a remainderman and how tenant benefits or income from the property during the delay affect their share of the delayed income.

When someone leasing property ends up owning it through payments secured by an obligation like a mortgage, any property they acquire this way is treated as a single asset. Income and expenses from it are divided as with similar property types. Profits from selling this property are split: first covering any unpaid interest from the original mortgage, with the rest going to the principal. If there's a new owner involved, the interest payments are split as earlier income rules dictate. When selling or handling bonds, notes, or securities that have unpaid interest from before, proceeds are shared between income and principal, but income can't exceed what the interest would have been.

In California, when managing an estate, most regular costs like taxes, mortgage interest, and minor repairs must be paid from the income generated by the estate. Special costs, like those from selling non-productive property or legal fees for regular services, are split between income and the principal investment. Major expenses, such as attorney fees for protecting the property or costs for buying and selling property, should come out of the principal amount. Taxes on profits are also paid from the principal, even if they are called income taxes by the authorities.