§860D. REMIC defined — Inbound Citations
26 U.S.C. § 860D
Cited by 69 provisions in release 119-102.
Citations to §860D(a)
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(ii) A regulated investment company to which part I of subchapter M applies, a real estate investment trust to which part II of subchapter M applies, or a REMIC to which part IV of subchapter M applies, shall not be treated as a new loss corporation having substantial nonbusiness assets.
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(1) For purposes of this subtitle, in the case of a financial institution referred to in paragraph (2), the sale or exchange of a bond, debenture, note, or certificate or other evidence of indebtedness shall not be considered a sale or exchange of a capital asset. For purposes of the preceding sentence, any regular or residual interest in a REMIC shall be treated as an evidence of indebtedness.
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(4) A regular or residual interest in a REMIC shall be treated as a qualifying real property loan; except that, if less than 95 percent of the assets of such REMIC are qualifying real property loans (determined as if the taxpayer held the assets of the REMIC), such interest shall be so treated only in the proportion which the assets of such REMIC consist of such loans. For purposes of determining whether any interest in a REMIC qualifies under the preceding sentence, any interest in another REMIC held by such REMIC shall be treated as a qualifying real property loan under principles similar to the principles of the preceding sentence, except that if such REMIC’s are part of a tiered structure, they shall be treated as 1 REMIC for purposes of this paragraph.
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(E) A regular or residual interest in a REMIC shall be treated as a real estate asset, and any amount includible in gross income with respect to such an interest shall be treated as interest on an obligation secured by a mortgage on real property; except that, if less than 95 percent of the assets of such REMIC are real estate assets (determined as if the real estate investment trust held such assets), such real estate investment trust shall be treated as holding directly (and as receiving directly) its proportionate share of the assets and income of the REMIC. For purposes of determining whether any interest in a REMIC qualifies under the preceding sentence, any interest held by such REMIC in another REMIC shall be treated as a real estate asset under principles similar to the principles of the preceding sentence, except that, if such REMIC’s are part of a tiered structure, they shall be treated as one REMIC for purposes of this subparagraph.
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(a) Except as otherwise provided in this part, a REMIC shall not be subject to taxation under this subtitle (and shall not be treated as a corporation, partnership, or trust for purposes of this subtitle).
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(a) In determining the tax under this chapter of any holder of a regular interest in a REMIC, such interest (if not otherwise a debt instrument) shall be treated as a debt instrument.
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(b) The amounts includible in gross income with respect to any regular interest in a REMIC shall be determined under the accrual method of accounting.
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(1) In determining the tax under this chapter of any holder of a residual interest in a REMIC, such holder shall take into account his daily portion of the taxable income or net loss of such REMIC for each day during the taxable year on which such holder held such interest.
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(1) The taxable income of a REMIC shall be determined under an accrual method of accounting and, except as provided in regulations, in the same manner as in the case of an individual, except that—(A) regular interests in such REMIC (if not otherwise debt instruments) shall be treated as indebtedness of such REMIC,(B) market discount on any market discount bond shall be included in gross income for the taxable years to which it is attributable as determined under the rules of section 1276(b)(2) (and sections 1276(a) and 1277 shall not apply),(C) there shall not be taken into account any item of income, gain, loss, or deduction allocable to a prohibited transaction,(D) the deductions referred to in section 703(a)(2) (other than any deduction under section 212) shall not be allowed, and(E) the amount of the net income from foreclosure property (if any) shall be reduced by the amount of the tax imposed by section 860G(c).
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(A) regular interests in such REMIC (if not otherwise debt instruments) shall be treated as indebtedness of such REMIC,
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(2) The net loss of any REMIC is the excess of—(A) the deductions allowable in computing the taxable income of such REMIC, over(B) its gross income.Such amount shall be determined with the modifications set forth in paragraph (1).
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(A) the deductions allowable in computing the taxable income of such REMIC, over
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(c) Any distribution by a REMIC—(1) shall not be included in gross income to the extent it does not exceed the adjusted basis of the interest, and(2) to the extent it exceeds the adjusted basis of the interest, shall be treated as gain from the sale or exchange of such interest.
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(1) The basis of any person’s residual interest in a REMIC shall be increased by the amount of the taxable income of such REMIC taken into account under subsection (a) by such person with respect to such interest.
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(2) The basis of any person’s residual interest in a REMIC shall be decreased (but not below zero) by the sum of the following amounts:(A) any distributions to such person with respect to such interest, and(B) any net loss of such REMIC taken into account under subsection (a) by such person with respect to such interest.
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(B) any net loss of such REMIC taken into account under subsection (a) by such person with respect to such interest.
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(1) Any amount taken into account under subsection (a) by any holder of a residual interest in a REMIC shall be treated as ordinary income or ordinary loss, as the case may be.
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(A) The amount of the net loss of any REMIC taken into account by a holder under subsection (a) with respect to any calendar quarter shall not exceed the adjusted basis of such holder’s residual interest in such REMIC as of the close of such calendar quarter (determined without regard to the adjustment under subsection (d)(2)(B) for such calendar quarter).
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(B) Any loss disallowed by reason of subparagraph (A) shall be treated as incurred by the REMIC in the succeeding calendar quarter with respect to such holder.
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(1) The taxable income of any holder of a residual interest in a REMIC for any taxable year shall in no event be less than the excess inclusion for such taxable year.
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(B) the alternative minimum taxable income of any holder of a residual interest in a REMIC for any taxable year shall in no event be less than the excess inclusion for such taxable year, and
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(b) If the holder of any residual interest in a REMIC is an organization subject to the tax imposed by section 511, the excess inclusion of such holder for any taxable year shall be treated as unrelated business taxable income of such holder for purposes of section 511.
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(1) The term “excess inclusion” means, with respect to any residual interest in a REMIC for any calendar quarter, the excess (if any) of—(A) the amount taken into account with respect to such interest by the holder under section 860C(a), over(B) the sum of the daily accruals with respect to such interest for days during such calendar quarter while held by such holder.To the extent provided in regulations, if residual interests in a REMIC do not have significant value, the excess inclusions with respect to such interests shall be the amount determined under subparagraph (A) without regard to subparagraph (B).
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(d) If a residual interest in a REMIC is held by a real estate investment trust, under regulations prescribed by the Secretary—(1) any excess of—(A) the aggregate excess inclusions determined with respect to such interests, over(B) the real estate investment trust taxable income (within the meaning of section 857(b)(2), excluding any net capital gain),shall be allocated among the shareholders of such trust in proportion to the dividends received by such shareholders from such trust, and(2) any amount allocated to a shareholder under paragraph (1) shall be treated as an excess inclusion with respect to a residual interest held by such shareholder.Rules similar to the rules of the preceding sentence shall apply also in the case of regulated investment companies, common trust funds, and organizations to which part I of subchapter T applies.
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(1) A tax is hereby imposed on any transfer of a residual interest in a REMIC to a disqualified organization.
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(1) There is hereby imposed for each taxable year of a REMIC a tax equal to 100 percent of the net income derived from prohibited transactions.
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(A) The disposition of any qualified mortgage transferred to the REMIC other than a disposition pursuant to—(i) the substitution of a qualified replacement mortgage for a qualified mortgage (or the repurchase in lieu of substitution of a defective obligation),(ii) a disposition incident to the foreclosure, default, or imminent default of the mortgage,(iii) the bankruptcy or insolvency of the REMIC, or(iv) a qualified liquidation.
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(iii) the bankruptcy or insolvency of the REMIC, or
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(C) The receipt by the REMIC of any amount representing a fee or other compensation for services.
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(i) the REMIC adopts a plan of complete liquidation,
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(A) No gain or loss shall be recognized to the transferor on the transfer of any property to a REMIC in exchange for regular or residual interests in such REMIC.
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(ii) in the case of a residual interest, such excess shall be included in gross income ratably over the anticipated period during which the REMIC will be in existence.
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(ii) in the case of a residual interest, such excess shall be allowable as a deduction ratably over the anticipated period during which the REMIC will be in existence.
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(2) The basis of any property received by a REMIC in a transfer described in paragraph (1)(A) shall be its fair market value immediately after such transfer.
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(c) If a REMIC makes a distribution of property with respect to any regular or residual interest—
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(1) any residual interest in a REMIC shall be treated as a security, and
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(2) in applying such section to any loss claimed to have been sustained on the sale or other disposition of a residual interest in a REMIC—(A) except as provided in regulations, any residual interest in any REMIC and any interest in a taxable mortgage pool (as defined in section 7701(i)) comparable to a residual interest in a REMIC shall be treated as substantially identical stock or securities, and
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(A) except as provided in regulations, any residual interest in any REMIC and any interest in a taxable mortgage pool (as defined in section 7701(i)) comparable to a residual interest in a REMIC shall be treated as substantially identical stock or securities, and
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(e) For purposes of subtitle F, a REMIC shall be treated as a partnership (and holders of residual interests in such REMIC shall be treated as partners). Any return required by reason of the preceding sentence shall include the amount of the daily accruals determined under section 860E(c). Such return shall be filed by the REMIC. The determination of who may sign such return shall be made without regard to the first sentence of this subsection.
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(1) The term “regular interest” means any interest in a REMIC which is issued on the startup day with fixed terms and which is designated as a regular interest if—(A) such interest unconditionally entitles the holder to receive a specified principal amount (or other similar amount), and(B) interest payments (or other similar amount), if any, with respect to such interest at or before maturity—(i) are payable based on a fixed rate (or to the extent provided in regulations, at a variable rate), or(ii) consist of a specified portion of the interest payments on qualified mortgages and such portion does not vary during the period such interest is outstanding.The interest shall not fail to meet the requirements of subparagraph (A) merely because the timing (but not the amount) of the principal payments (or other similar amounts) may be contingent on the extent of prepayments on qualified mortgages and the amount of income from permitted investments. An interest shall not fail to qualify as a regular interest solely because the specified principal amount of the regular interest (or the amount of interest accrued on the regular interest) can be reduced as a result of the nonoccurrence of 1 or more contingent payments with respect to any reverse mortgage loan held by the REMIC if, on the startup day for the REMIC, the sponsor reasonably believes that all principal and interest due under the regular interest will be paid at or prior to the liquidation of the REMIC.
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(2) The term “residual interest” means an interest in a REMIC which is issued on the startup day, which is not a regular interest, and which is designated as a residual interest.
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(3) The term “qualified mortgage” means—(A) any obligation (including any participation or certificate of beneficial ownership therein) which is principally secured by an interest in real property and which—(i) is transferred to the REMIC on the startup day in exchange for regular or residual interests in the REMIC,(ii) is purchased by the REMIC within the 3-month period beginning on the startup day if, except as provided in regulations, such purchase is pursuant to a fixed-price contract in effect on the startup day, or(iii) represents an increase in the principal amount under the original terms of an obligation described in clause (i) or (ii) if such increase—(I) is attributable to an advance made to the obligor pursuant to the original terms of a reverse mortgage loan or other obligation,(II) occurs after the startup day, and(III) is purchased by the REMIC pursuant to a fixed price contract in effect on the startup day,(B) any qualified replacement mortgage, and(C) any regular interest in another REMIC transferred to the REMIC on the startup day in exchange for regular or residual interests in the REMIC.For purposes of subparagraph (A), any obligation secured by stock held by a person as a tenant-stockholder (as defined in section 216) in a cooperative housing corporation (as so defined) shall be treated as secured by an interest in real property. For purposes of subparagraph (A), any obligation originated by the United States or any State (or any political subdivision, agency, or instrumentality of the United States or any State) shall be treated as principally secured by an interest in real property if more than 50 percent of such obligations which are transferred to, or purchased by, the REMIC are principally secured by an interest in real property (determined without regard to this sentence).
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(i) is transferred to the REMIC on the startup day in exchange for regular or residual interests in the REMIC,
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(ii) is purchased by the REMIC within the 3-month period beginning on the startup day if, except as provided in regulations, such purchase is pursuant to a fixed-price contract in effect on the startup day, or
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(III) is purchased by the REMIC pursuant to a fixed price contract in effect on the startup day,
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(C) any regular interest in another REMIC transferred to the REMIC on the startup day in exchange for regular or residual interests in the REMIC.
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(A) which would be a qualified mortgage if transferred on the startup day in exchange for regular or residual interests in the REMIC, and
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(6) The term “cash flow investment” means any investment of amounts received under qualified mortgages for a temporary period before distribution to holders of interests in the REMIC.
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(B) For purposes of subparagraph (A), the term “qualified reserve fund” means any reasonably required reserve to—(i) provide for full payment of expenses of the REMIC or amounts due on regular interests in the event of defaults on qualified mortgages or lower than expected returns on cash flow investments, or(ii) provide a source of funds for the purchase of obligations described in clause (ii) or (iii) of paragraph (3)(A).The aggregate fair market value of the assets held in any such reserve shall not exceed 50 percent of the aggregate fair market value of all of the assets of the REMIC on the startup day, and the amount of any such reserve shall be promptly and appropriately reduced to the extent the amount held in such reserve is no longer reasonably required for purposes specified in clause (i) or (ii) of this subparagraph.
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(i) provide for full payment of expenses of the REMIC or amounts due on regular interests in the event of defaults on qualified mortgages or lower than expected returns on cash flow investments, or
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(8) The term “foreclosure property” means property—(A) which would be foreclosure property under section 856(e) (without regard to paragraph (5) thereof) if acquired by a real estate investment trust, and(B) which is acquired in connection with the default or imminent default of a qualified mortgage held by the REMIC.Solely for purposes of section 860D(a), the determination of whether any property is foreclosure property shall be made without regard to section 856(e)(4).
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(B) which is acquired in connection with the default or imminent default of a qualified mortgage held by the REMIC.
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(9) The term “startup day” means the day on which the REMIC issues all of its regular and residual interests. To the extent provided in regulations, all interests issued (and all transfers to the REMIC) during any period (not exceeding 10 days) permitted in such regulations shall be treated as occurring on the day during such period selected by the REMIC for purposes of this paragraph.
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(10) The issue price of any regular or residual interest in a REMIC shall be determined under section 1273(b) in the same manner as if such interest were a debt instrument; except that if the interest is issued for property, paragraph (3) of section 1273(b) shall apply whether or not the requirements of such paragraph are met.
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(b) If the holder of a residual interest in a REMIC is a nonresident alien individual or a foreign corporation, for purposes of sections 871(a), 881, 1441, and 1442—(1) amounts includible in the gross income of such holder under this part shall be taken into account when paid or distributed (or when the interest is disposed of), and(2) no exemption from the taxes imposed by such sections (and no reduction in the rates of such taxes) shall apply to any excess inclusion.The Secretary may by regulations provide that such amounts shall be taken into account earlier than as provided in paragraph (1) where necessary or appropriate to prevent the avoidance of tax imposed by this chapter.
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(1) A tax is hereby imposed for each taxable year on the net income from foreclosure property of each REMIC. Such tax shall be computed by multiplying the net income from foreclosure property by the highest rate of tax specified in section 11(b).
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(2) For purposes of this part, the term “net income from foreclosure property” means the amount which would be the REMIC’s net income from foreclosure property under section 857(b)(4)(B) if the REMIC were a real estate investment trust.
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(1) Except as provided in paragraph (2), if any amount is contributed to a REMIC after the startup day, there is hereby imposed a tax for the taxable year of the REMIC in which the contribution is received equal to 100 percent of the amount of such contribution.
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(D) Any contribution to a qualified reserve fund by any holder of a residual interest in the REMIC.
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(1) to prevent unreasonable accumulations of assets in a REMIC,
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(2) permitting determinations of the fair market value of property transferred to a REMIC and issue price of interests in a REMIC to be made earlier than otherwise provided,
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(4) providing appropriate rules for treatment of transfers of qualified replacement mortgages to the REMIC where the transferor holds any interest in the REMIC, and
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(ii) which is an interest in a trust, partnership, or REMIC, or
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(B) a regulated investment company, real estate investment trust, or REMIC, and
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(H) a REMIC.
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(i) any regular interest in a REMIC or qualified mortgage held by a REMIC,