Page:United States Statutes at Large Volume 100 Part 3.djvu/501

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2309

"PART IV—REAL ESTATE MORTGAGE INVESTMENT CONDUITS "Sec. "Sec. "Sec. "Sec. "Sec.

860A. Taxation of REMIC's. 860B. Taxation of holders of regular interests. 860C. Taxation of residual interests 860D. REMIC defined. 860E. Treatment of income in excess of daily accruals on residual interests. "Sec. 860F Other rules. "Sec 860G. Other definitions and special rules. "SEC 860A. TAXATION OF REMIC's.

"(a) GENERAL RULE.—Except as otherwise provided in this part, a REMIC shall not be subject to taxation under this chapter (and shall not be treated as a corporation, partnership, or trust for purposes of this chapter). "(b) INCOME TAXABLE TO HOLDERS.—The income of any REMIC shall be taxable to the holders of interests in such REMIC as provided in this part. "SEC. 860B. TAXATION OF HOLDERS OF REGULAR INTERESTS

"(a) GENERAL RULE.—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. "(b) HOLDERS MUST USE ACCRUAL METHOD.—The amounts includ-

ible in gross income with respect to any regular interest in a REMIC shall be determined under the accrual method of accounting. "(c) PORTION OF GAIN TREATED AS ORDINARY INCOME.—Gain on the

disposition of a regular interest 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 with respect to such interest if the yield on such interest were 110 percent of the applicable Federal rate (as defined in section 1274(d) without regard to paragraph (2) thereof) as of the beginning of the taxpayer's holding period, over "(2) the amount actually includible in gross income with respect to such interest by the taxpayer. "(d) CROSS REFERENCE.— "For special rules in determining inclusion of original issue discount on regular interests, see section 1272(a)(6). •SEC. 860C. TAXATION OF RESIDUAL INTERESTS.

"(a) PASS-THRU OF INCOME OR Loss.— "(1) IN GENERAL.—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. "(2) DAILY PORTION.—The daily portion referred to in paragraph (1) shall be determined— "(A) by allocating to each day in any calendar quarter its ratable portion of the taxable income (or net loss) for such quarter, and "(B) by allocating the amount so allocated to any day among the holders (on such day) of residual interests in proportion to their respective holdings on such day.

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