---
kind: "section"
citation: "26 U.S.C. § 860B"
title: "26"
title_heading: "Internal Revenue Code"
number: "860B"
heading: "Taxation of holders of regular interests"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/26/860B"
units:
  - "Subtitle A — Income Taxes"
  - "Chapter 1 — Normal Taxes and Surtaxes"
  - "Subchapter M — Regulated Investment Companies and Real Estate Investment Trusts"
  - "Part IV — Real Estate Mortgage Investment Conduits"
---

# §860B. Taxation of holders of regular interests

- (a) **General rule—** In determining the tax under this chapter of any holder of a [regular interest](/usc/26/860G.md?p=a-1) in a [REMIC](/usc/26/860D.md?p=a), such [interest](/usc/26/856.md?p=f-1) (if not otherwise a [debt instrument](/usc/26/1275.md?p=a-1-A)) shall be treated as a [debt instrument](/usc/26/1275.md?p=a-1-A).
- (b) **Holders must use accrual method—** The amounts includible in gross income with respect to any [regular interest](/usc/26/860G.md?p=a-1) in a [REMIC](/usc/26/860D.md?p=a) shall be determined under the accrual method of accounting.
- (c) **Portion of gain treated as ordinary income—** Gain on the [disposition](/usc/26/424.md?p=c-1) of a [regular interest](/usc/26/860G.md?p=a-1) shall be treated as ordinary income to the extent such gain does not exceed the excess (if any) of—
  - (1) the amount which would have been includible in the gross income of the [taxpayer](/usc/26/1313.md?p=b) with respect to such [interest](/usc/26/856.md?p=f-1) if the yield on such [interest](/usc/26/856.md?p=f-1) were 110 percent of the applicable Federal rate (as defined in [section 1274(d)](/usc/26/1274.md?p=d) without regard to [paragraph (2)](#c-2) thereof) as of the beginning of the [taxpayer](/usc/26/1313.md?p=b)’s holding period, over
  - (2) the amount actually includible in gross income with respect to such [interest](/usc/26/856.md?p=f-1) by the [taxpayer](/usc/26/1313.md?p=b).
- (d) **Cross reference—** For special rules in determining inclusion of [original issue discount](/usc/26/1278.md?p=a-5) on [regular interests](/usc/26/860G.md?p=a-1), see [section 1272(a)(6)](/usc/26/1272.md?p=a-6).

## Source credit

(Added Pub. L. 99–514, title VI, § 671(a), Oct. 22, 1986, 100 Stat. 2309.)