Page:United States Statutes at Large Volume 102 Part 4.djvu/453

 PUBLIC LAW 100-647—NOV. 10, 1988

102 STAT. 3423

(13) Subparagraph (B) of section 860E(c)(2) of the 1986 Code is amended by striking out "issue price of residual interest" and inserting in lieu thereof "issue price of the residual interest". (14) Clause (ii) of section 860F(b)(l)(D) of the 1986 Code is amended by striking out "the real estate mortgage pool" and inserting in lieu thereof "the REMIC". (15) Subsection (a) of section 860E of the 1986 Code is amended by adding at the end thereof the following new paragraphs: "(3) SPECIAL RULE FOR AFFIUATED GROUPS.—All members of an affiliated group filing a consolidated return shall be treated as 1 taxpayer for purposes of this subsection, except that paragraph (2) shall be applied separately with respect to each corporation which is a member of such group and to which section 593 applies. "(4) TREATMENT OF CERTAIN SUBSIDIARIES.—

"(A) IN GENERAL.—For purposes of this subsection, a corporation to which section 593 applies and each qualified subsidiary of such corporation shall be treated as a single corporation to which section 593 applies. "(B) QUALIFIED SUBSIDIARY.—For purposes of this subsection, the term 'qualified subsidiary' means any corporation— "(i) all the stock of which, and substantially all the indebtedness of which, is held directly by the corporation to which section 593 applies, and "(ii) which is organized and operated exclusively in connection with the organization and operation of 1 or more REMIC's." (16XA) Subsection (a) of section 860D of the 1986 Code is amended by striking out "and" a t the end of paragraph (4), by striking out the period at the end of paragraph (5) and inserting in lieu thereof ", and", and by adding at the end thereof the following new paragraph: "(6) with respect to which there are reasonable arrangements designed to ensure that— "(A) residual interests in such entity are not held by disqualified organizations (as defined in section 860EXeX5)), and "(B) information necessary for the application of section 860E(e) will be made available by the entity." (B) Section 860E of the 1986 Code is amended by adding at the end thereof the following new subsection: "(e) TAX ON TRANSFERS OF RESIDUAL INTERESTS TO CERTAIN ORGANIZATIONS, ETC.—

"(1) IN GENERAL.—A tax is hereby imposed on any transfer of "'^ a residual interest in a REMIC to a disqualified organization. "(2) AMOUNT OF TAX.—The amount of the tax imposed by

paragraph (1) on any transfer of a residual interest shall be equal to the product of— "(A) the amount (determined under regulations) equal to the present value of the total anticipated excess inclusions with respect to such interest for periods after such transfer, multiplied by "(B) the highest rate of tax specified in section ll(b)(l). "(3) LIABILITY.—The tax imposed by paragraph (1) on any transfer shall be paid by the transferor; except that, where such

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