1997 Department of the Treasury

Internal Revenue Service

Instructions for Form 1066

U.S. Real Estate Mortgage Investment Conduit
(REMIC) Income Tax Return
Section references are to the Internal Revenue Code, unless otherwise noted.

General Instructions 2. All of the interests in which are 860D(a) in 1997, the election to be a
regular interests or residual interests, REMIC is terminated for 1997 and all
How To Get Forms and 3. That has one (and only one) class future years. For 1997 and all future years
of residual interests and all distributions, you must file the tax form for similarly
Publications organized entities (corporations,
if any, with respect to such interests are
Personal computer.— Visit the IRS's pro rata, partnerships, trusts, etc.).
Internet Web Site at 4. Substantially all of the assets of
www.irs.ustreas.gov to get: When To File
which consist of qualified mortgages and
● Forms and instructions Generally, REMICs must file the 1997
permitted investments (as of the close of
● Publications the 3rd month beginning after the startup Form 1066 by April 15, 1998. However, if
● IRS press releases and fact sheets. day (defined in the instructions for Item 1997 is the entity's final return, Form 1066
You can also reach us using: B, on page 3) and at all times thereafter), is due by the 15th day of the 4th month
● Telnet at iris.irs.ustreas.gov 5. That has a calendar tax year, and following the date the REMIC ceased to
6. For which reasonable exist.
● File Transfer Protocol at
arrangements have been designed to If you need more time to file a REMIC
ftp.irs.ustreas.gov return, get Form 8736, Application for
● Direct Dial (by modem)—Dial direct to ensure that (a) residual interests are not
held by disqualified organizations (as Automatic Extension of Time To File U.S.
the Internal Revenue Information Services Return for a Partnership, REMIC, or for
(IRIS) by calling 703-321-8020 using your defined in section 860E(e)(5)), and (b)
information needed to apply section Certain Trusts, to request an automatic
modem. 3-month extension. You must file Form
860E(e) will be made available by the
CD-ROM.— A CD-ROM containing over entity. 8736 by the regular due date of the
2,000 tax products (including many prior REMIC return.
year forms) can be purchased from the Note: Paragraph 6 does not apply to
REMICs with a startup day before April If you have filed Form 8736 and you still
Government Printing Office (GPO). To need more time to file the REMIC return,
order the CD-ROM, call the 1, 1988 (or those formed under a binding
contract in effect on March 31, 1988). get Form 8800, Application for Additional
Superintendent of Documents at Extension of Time To File U.S. Return for
202-512-1800 or go through GPO's See section 860G for definitions and
special rules. See section 860D(a) a Partnership, REMIC, or for Certain
Internet Web Site Trusts, to request an additional extension
(www.access.gpo.gov/su_docs). regarding qualification as a REMIC during
a qualified liquidation. of up to 3 months. To obtain this
By phone and in person.— To order extension, you must show reasonable
forms and publications, call Making the Election cause for the additional time you are
1-800-TAX-FORM (1-800-829-3676) requesting. Ask for the additional
between 7:30 a.m. and 5:30 p.m. on The election to be treated as a REMIC is extension early so that if it is denied, the
weekdays. You can also get most forms made by timely filing, for the first tax year return can still be filed on time.
and publications at your local IRS office. of its existence, a Form 1066 signed by
an authorized person. Once the election Where To File
Purpose of Form is made, it stays in effect for all years until
File Form 1066 with the Internal Revenue
Form 1066 is used to report the income, it is terminated.
Service Center listed below.
deductions, and gains and losses from the First Tax Year
operation of a real estate mortgage If the REMIC's principal
investment conduit (REMIC). In addition, For the first tax year of a REMIC's place of business or Use the following
existence, the REMIC must furnish the principal office or address
the form is used by the REMIC to report agency is located in
and pay the taxes on net income from following in a separate statement
prohibited transactions, net income from attached to the REMIC's initial return:
foreclosure property, and contributions 1. Information concerning the terms New Jersey, New York (New
of the regular interests and the designated York City and counties of
after the startup day. Nassau, Rockland, Suffolk,
Holtsville, NY 00501
residual interest of the REMIC, or a copy and Westchester)
Who Must File of the offering circular or prospectus
containing such information, and New York (all other
An entity that elects to be treated as a counties), Connecticut,
REMIC for its first tax year (and for which 2. A description of the prepayment Maine, Massachusetts, New Andover, MA 05501
the election is still in effect) and that and reinvestment assumptions made in Hampshire, Rhode Island,
accordance with section 1272(a)(6) and Vermont
meets the requirements of section
860D(a) must file Form 1066. its regulations, including documentation Florida, Georgia, South
Atlanta, GA 39901
A REMIC is any entity: supporting the selection of the Carolina

1. To which an election to be treated prepayment assumption. Indiana, Kentucky, Michigan,

Cincinnati, OH 45999
as a REMIC applies for the tax year and Ohio, West Virginia
Termination of Election
all prior tax years, Kansas, New Mexico,
If the entity ceased to qualify as a REMIC Oklahoma, Texas
Austin, TX 73301
under the requirements of section

Cat. No. 64231R

Alaska, Arizona, California should also be checked to indicate when income (e.g., payments to certain fishing
(counties of Alpine, Amador, the schedule is for the final quarter of the boat crew members, payments to
Butte, Calaveras, Colusa, year. providers of health and medical services,
Contra Costa, Del Norte, El
Dorado, Glenn, Humboldt, miscellaneous income payments, and
Lake, Lassen, Marin, Amended Return nonemployee compensation);
Mendocino, Modoc, Napa, If after the REMIC files its return it later distributions from a medical savings
Nevada, Placer, Plumas,
Sacramento, San Joaquin, Ogden, UT 84201 becomes aware of any changes it must account (MSA); original issue discount;
Shasta, Sierra, Siskiyou, make to income, deductions, etc., the distributions from pensions, annuities,
Solano, Sonoma, Sutter, REMIC should file an amended: retirement or profit-sharing plans, IRAs,
Tehama, Trinity, Yolo, and insurance contracts, etc.; and proceeds
Yuba), Colorado, Idaho, ● Form 1066 and check the box at Item
Montana, Nebraska, Nevada, D(3), page 1. from real estate transactions. Also, use
North Dakota, Oregon, South ● Schedule Q (Form 1066), for each these returns to report amounts that were
Dakota, Utah, Washington, received as a nominee on behalf of
Wyoming residual interest holder, and check the
box at Item E(2). Give corrected another person.
California (all other counties), For more details, see the Instructions
Hawaii
Fresno, CA 93888 Schedules Q (Form 1066) to each
residual interest holder. for Forms 1099, 1098, 5498, and W-2G.
Illinois, Iowa, Minnesota,
Kansas City, MO 64999 Note: If a REMIC does not meet the Note: Generally, a REMIC must file
Missouri, Wisconsin Forms 1099-INT and 1099-OID, as
small REMIC exception under sections
Alabama, Arkansas, 860F(e) and 6231, and related appropriate, to report accrued income of
Louisiana, Mississippi, North Memphis, TN 37501 regulations, or if a REMIC makes the $10 or more of regular interest holders.
Carolina, Tennessee See Regulations section 1.6049-7. Also,
election described in section
Delaware, District of 6231(a)(1)(B)(ii) not to be treated as a every REMIC must file Forms 1099-MISC
Columbia, Maryland, Philadelphia, PA 19255 small REMIC, the amended return will be if it makes payments of rents,
Pennsylvania, Virginia commissions, or other fixed or
a request for administrative adjustment,
and Form 8082, Notice of Inconsistent determinable income (see section 6041)
Accounting Method Treatment or Administrative Adjustment totaling $600 or more to any one person
A REMIC must compute its taxable Request (AAR), must be filed by the Tax in the course of its trade or business
income (or net loss) using the accrual Matters Person. See sections 860F(e) during the calendar year.
method of accounting. See section and 6227 for more information. Form 8275, Disclosure Statement, and
860C(b). If the REMIC's Federal return is Form 8275-R, Regulation Disclosure
Under the accrual method, an amount changed for any reason, it may affect its Statement. Use these forms to disclose
is includible in income when all the events state return. This would include changes items or positions taken on a tax return
have occurred that fix the right to receive made as a result of an examination of the that are not otherwise adequately
the income and the amount can be REMIC return by the IRS. Contact the disclosed on the return or that are
determined with reasonable accuracy. state tax agency where the state return is contrary to Treasury regulations (to avoid
Generally, an accrual basis taxpayer filed for more information. parts of the accuracy-related penalty or
can deduct accrued expenses in the tax certain preparer penalties).
year that all events occurred that Attachments Form 8300, Report of Cash Payments
determine the liability and the amount of If you need more space on the forms or Over $10,000 Received in a Trade or
the liability can be determined with schedules, attach separate sheets. Use Business. Generally, this form is used to
reasonable accuracy. However, all the the same size and format as on the report the receipt of more than $10,000 in
events that establish liability for the printed forms. But show the totals on cash or foreign currency in one
amount are treated as occurring only the printed forms. Be sure to put the transaction (or a series of related
when economic performance takes place. REMIC's name and employer transactions).
There are exceptions for recurring items. identification number on each sheet. Form 8811, Information Return for Real
See section 461(h). You must complete every applicable Estate Mortgage Investment Conduits
entry space on Form 1066. If you attach (REMICs) and Issuers of Collateralized
Rounding Off to Whole Dollars statements, do not write “See Attached” Debt Obligations. A REMIC uses this form
You may round off cents to the nearest instead of completing the entry spaces on to provide the information required by
whole dollar on the return and schedules. this form. Regulations section 1.6049-7(b)(1)(ii).
To do so, drop amounts less than 50 This information will be published in Pub.
cents and increase amounts from 50 Other Forms and Returns That May 938, Real Estate Mortgage Investment
cents through 99 cents to the next higher Be Required Conduits (REMICs) Reporting
dollar. Form 1096, Annual Summary and Information. This publication contains a
Transmittal of U.S. Information Returns. directory of REMICs.
Recordkeeping Note: Pub. 938 is no longer printed. It is
Use this form to summarize and send
The REMIC records must be kept as long information returns to the Internal available on CD-ROM or the Internet (see
as their contents may be material in the Revenue Service Center. How To Get Forms and Publications
administration of any Internal Revenue Form 1098, Mortgage Interest Statement.
on page 1 of the instructions for details),
law. Copies of the filed tax returns should This form is used to report the receipt
or the IRP-BBS at 304-264-7070.
also be kept as part of the REMIC's from any individual of $600 or more of Form 8822, Change of Address, may be
records. See Pub. 583, Starting a mortgage interest and points in the course used to inform the IRS of a new REMIC
Business and Keeping Records, for more of the REMIC's trade or business. address if the change is made after filing
information. Form 1066.
Forms 1099-A, B, C, INT, LTC, MISC,
Final Return MSA, OID, R and S. Use these Payment of Tax Due
information returns to report acquisitions
If the REMIC ceases to exist during the or abandonments of secured property; The REMIC must pay the tax due (line 3,
year, check the box at Item D(1), page 1, proceeds from broker and barter Section II, page 1) in full by the 15th day
Form 1066. exchange transactions; cancellation of a of the 4th month following the end of the
The Item E(1) box of Schedule Q debt; interest income; certain payments tax year. Enclose with Form 1066 a check
(Form 1066), Quarterly Notice to made on a per diem basis under a or money order for the amount due
Residual Interest Holder of REMIC long-term insurance contract, and certain payable to the “Internal Revenue
Taxable Income or Net Loss Allocation, accelerated death benefits; miscellaneous Service.”

Page 2
Interest and Penalties anticipated weighted average life of the ● After the facsimile signature is affixed,
REMIC (as defined in Regulations section no entries on the return may be altered
Interest.— Interest is charged on taxes
1.860E-1(a)(3)(iv)). other than to correct discernible arithmetic
not paid by the due date, even if an
If the adjusted basis of a regular errors;
extension of time to file is granted.
interest is more than its issue price, the ● A manually signed copy of the letter
Interest is also charged on penalties
imposed for failure to file, negligence, regular interest holder treats the excess submitted to the IRS with the returns, as
fraud, gross valuation overstatement, and as amortizable bond premium subject to well as a record of any arithmetic errors
substantial understatement of tax from the the rules of section 171. If the adjusted corrected, must be retained on behalf of
due date (including extensions) to the basis of a residual interest is more than the REMICs listed in the letter and must
date of payment. The interest charge is its issue price, the excess is deductible be available for inspection by the IRS.
figured at a rate determined under section ratably over the anticipated weighted Paid preparer's information.— If
6621. average life of the REMIC (as defined in someone prepares the return and does
Regulations section 1.860E-1(a)(3)(iv)). not charge the REMIC, that person should
Late filing penalty.— A penalty may be
charged if (a) the return is filed after the not sign the return.
Payments Subject to Withholding
due date (including extensions), or (b) the Generally, anyone who is paid to
at Source prepare the REMIC return must sign the
return does not show all the information
required. However, the penalty will not be If there are any nonresident alien return and fill in the Paid Preparer's Use
charged if you can show reasonable individuals, foreign partnerships, or Only area of the return.
cause for the late filing or for the failure foreign corporations as regular interest The preparer required to sign the
to include the required information on the holders or residual interest holders, and REMIC's return must complete the
return. the REMIC has items of gross income required preparer information and:
If no tax is due, the amount of the from sources within the United States ● Sign in the space provided for the
penalty is $50 for each month or part of (see sections 861 through 865), see Form preparer's signature. A facsimile signature
a month (up to 5 months) the return is 1042, Annual Withholding Tax Return for is acceptable if the conditions under
late, multiplied by the total number of U.S. Source Income of Foreign Persons. Regulations section 1.6695-1(b)(4)(iv) are
persons who were residual interest Who Must Sign met.
holders in the REMIC during any part of Note: While the cite addresses use of a
the REMIC's tax year for which the return Startup day after November 9, 1988.— facsimile signature by a preparer of a
is due. If tax is due, the penalty is the For a REMIC with a startup day after fiduciary return, a preparer of a REMIC
amount stated above plus 5% of the November 9, 1988, Form 1066 may be return may also use a facsimile signature
unpaid tax for each month or part of a signed by any person who could sign the if those same conditions are met.
month the return is late, up to a maximum return of the entity in the absence of the ● Give the REMIC a copy of the return in
of 25% of the unpaid tax. If the return is REMIC election. Thus, the return of a
REMIC that is a corporation or trust would addition to the copy to be filed with the
more than 60 days late, the minimum IRS.
penalty is $100 or the balance of the tax be signed by a corporate officer or a
due on the return, whichever is smaller. trustee, respectively. For REMICs with
only segregated pools of assets, the Specific Instructions
Late payment penalty.— The penalty for
not paying the tax when due is usually 1/2 return would be signed by any person
who could sign the return of the entity General Information
of 1% of the unpaid tax for each month
or part of a month the tax is unpaid. The owning the assets of the REMIC under Name, address, and employer
penalty cannot exceed 25% of the unpaid applicable state law. identification number.— Print or type
tax. The penalty will not be charged if you Startup day before November 10, the REMIC's legal name and address on
can show reasonable cause for not paying 1988.— A REMIC with a startup day the appropriate lines. Include the suite,
on time. before November 10, 1988, may elect to room, or other unit number after the street
Other penalties.— Penalties can also be apply the rules for REMICs with a startup address. If the Post Office does not
imposed for negligence, substantial day after November 9, 1988 (as described deliver mail to the street address and the
understatement of tax, and fraud. See in Regulations section 1.860F-4(c)(2)(iii)). REMIC has a P.O. box, show the box
sections 6662 and 6663. Otherwise, Form 1066 must be signed by number instead of the street address.
a residual interest holder or, as provided Note: Each REMIC must have its own
Contributions to the REMIC in section 6903, by a fiduciary as defined employer identification number (EIN).
in section 7701(a)(6) who is acting for the Show the EIN in Item A on page 1 of
Generally, no gain or loss is recognized REMIC and who has furnished adequate
by the REMIC or any of the regular or Form 1066. If the REMIC does not have
notice as described in Regulations section an EIN, get Form SS-4, Application for
residual interest holders when property is 301.6903-1(b).
transferred to the REMIC in exchange for Employer Identification Number, for
an interest in the REMIC. The adjusted Note: For this purpose, the term “startup details on how to obtain an EIN
basis of the interest received equals the day” means any day selected by a REMIC immediately by telephone. If the REMIC
adjusted basis of the property transferred that is on or before the first day on which has previously applied for an EIN, but has
to the REMIC. interests in such REMIC are issued. not received it by the time the return is
Otherwise, “startup day” is defined in the due, write “Applied for” in the space for
The basis to the REMIC of property instructions for Item B below.
transferred by a regular or residual the EIN. Do not apply for an EIN more
interest holder is its fair market value Facsimile signature.— A facsimile than once. See Pub. 583 for details.
immediately after its transfer. signature is acceptable if the following Item B—Date REMIC started.— Enter
conditions are met: the “startup day” selected by the REMIC.
If the issue price of a regular interest is
● Each group of returns sent to the IRS The startup day is the day on which the
more than its adjusted basis, the excess
is included in income by the regular must be accompanied by a letter signed REMIC issued all of its regular and
interest holder for the applicable tax years by the person authorized to sign the residual interests. However, a sponsor
as if the excess were market discount on returns declaring, under penalties of may contribute property to a REMIC in
a bond and the holder had made an perjury, that the facsimile signature exchange for regular and residual
election under section 1278(b) to include appearing on the returns is the signature interests over any period of 10
this market discount currently. If the issue adopted by that person to sign the returns consecutive days and the REMIC may
price of a residual interest is more than its filed and that the signature was affixed to designate any one of those 10 days as
adjusted basis, the excess is amortized the returns by that person or at that the startup day. The day so designated is
and included in the residual interest person's direction. The letter must also list then the startup day, and all interests are
holder's income ratably over the each return by the name and employer treated as issued on that day.
identification number of the REMIC;
Page 3
Item C—Total assets at end of tax from income tax. You may elect to include For details, see Pub. 544, Sales and
year.— Enter the total assets of the amortization of bond premium on taxable Other Dispositions of Assets.
REMIC. If there are no assets at the end bonds acquired before 1988 unless you Capital gain distributions.— On line 7,
of the tax year, enter the total assets as elected to offset amortizable bond report as long-term capital gain
of the beginning of the tax year. premium against the interest accrued on distributions: (a) a capital gain dividend,
the bond (see the Section I, line 1, and (b) the REMIC's share of the
Section I instructions). Do not include any amount undistributed capital gain from a mutual
Line 1—Taxable interest.— Enter the attributable to a tax-exempt bond. fund or other regulated investment
total taxable interest. “Taxable interest” is Line 11—Taxes.— Enter taxes accrued company.
interest that is included in ordinary income during the tax year but do not include the For details, see Pub. 564, Mutual Fund
from all sources except interest exempt following: Distributions.
from tax and interest on tax-free covenant ● Federal income taxes (except the tax Losses on worthless securities.— If
bonds. You may elect under section on net income from foreclosure property); any securities that are capital assets
171(c) to reduce the amount of interest ● Foreign or U.S. possession income become worthless during the tax year, the
accrued on taxable bonds acquired after taxes; loss is a loss from the sale or exchange
1987 by the amount of amortizable bond ● Taxes not imposed on the REMIC; or of capital assets as of the last day of the
premium on those bonds attributable to tax year.
● Taxes, including state or local sales
the current tax year. There is also an
taxes, that are paid or incurred in Losses from wash sales.— The REMIC
election for taxable bonds acquired on or
connection with an acquisition or cannot deduct losses from a wash sale
after October 23, 1986.
disposition of property (such taxes must of stock or securities. A wash sale occurs
Line 2—Accrued market discount be treated as a part of the cost of the if the REMIC acquires (by purchase or
under section 860C(b)(1)(B).— Enter acquired property or, in the case of a exchange), or has a contract or option to
the amount of market discount attributable disposition, as a reduction in the amount acquire, substantially identical stock or
to the current tax year determined on the realized on the disposition). securities within 30 days before or after
basis of a constant interest rate under the the date of the sale or exchange. See
rules of section 1276(b)(2). Note: If you have to pay tax on net
income from foreclosure property, you section 1091 for details.
Line 3—Capital gain (loss).— Enter the should include this tax (from line 10 of Installment sales.— If the REMIC sold
amount shown on line 12 or 13 (if any), Schedule J) here on line 11. property (except publicly traded stock or
from Schedule D, page 2. securities) at a gain and will receive any
See section 164(d) for apportionment
Line 4—Ordinary gain (loss).— Enter of taxes on real property between the payment in a tax year after the year of
the net gain (loss) from Part II, Form seller and purchaser. sale, it must use the installment method
4797, Sales of Business Property. and Form 6252, Installment Sale Income,
Line 12—Depreciation.— See the
Line 5—Other income.— Attach a Instructions for Form 4562 or Pub. 946, unless it elects not to use the installment
schedule, listing by type and amount, any How To Depreciate Property, to figure the method.
other taxable income not reported on lines amount of depreciation to enter on this If the REMIC wants to elect out of the
1–4. If there is only one item of other line. You must complete and attach Form installment method, it must report the full
income, describe it in parentheses to the 4562, Depreciation and Amortization, if amount of the gain on a timely filed return
left of the entry space on line 5 instead the REMIC placed property in service (including extensions).
of attaching a schedule. If the REMIC during 1997, claims a section 179
issued regular interests at a premium, the Specific Instructions
expense deduction, or claims depreciation
net amount of the premium is income that on any car or other listed property. Column (d)—Sales price.— Enter either
must be prorated over the term of these the gross sales price or the net sales price
interests. Include this income on line 5. Line 13—Other deductions.— Attach a
schedule, listing by type and amount, any from the sale. On sales of stocks and
Deductions—(Lines 7–14).— Include other allowable deductions for which no bonds, report the gross amount as
only deductible amounts on lines 7–14. A line is provided on Form 1066. If there is reported to the REMIC by the REMIC's
REMIC is not allowed any of the following only one item of other deductions, broker on Form 1099-B, Proceeds From
deductions in computing its taxable describe it in parentheses to the left of the Broker and Barter Exchange
income: entry on line 13 instead of attaching a Transactions, or similar statement.
● The net operating loss deduction;
schedule. However, if the broker advised the REMIC
● The deduction for taxes paid or accrued that gross proceeds (gross sales price)
to foreign countries and U.S. Schedule D minus commissions and option premiums
possessions; were reported to the IRS, enter that net
● The deduction for charitable General Instructions amount in column (d).
contributions; Purpose of schedule.— For a REMIC Column (e)—Cost or other basis.— In
● The deduction for depletion under with a startup day before November 12, general, the cost or other basis is the cost
section 611 for oil and gas wells; and, 1991, use Schedule D to report the sale of the property plus purchase
● Losses or deductions allocable to or exchange of capital assets. To report commissions and improvements, minus
sales or exchanges of property other than depreciation. If the REMIC got the
prohibited transactions. property in a tax-free exchange,
Line 9—Amount accrued to regular capital assets, see Form 4797 and its
instructions. involuntary conversion, or wash sale of
interest holders in the REMIC that is stock, it may not be able to use the actual
deductible as interest.— Regular A REMIC with a startup day after
November 11, 1991, must use Form 4797 cash cost as the basis. If the REMIC uses
interests in the REMIC are treated as a basis other than cash cost, attach an
indebtedness for Federal income tax instead of Schedule D because all of its
gains and losses from the sale or explanation.
purposes. Enter the amount of interest, When selling stock, adjust the basis by
including original issue discount, accruing exchange of any property are treated as
ordinary gains and losses. subtracting all the nontaxable distributions
to regular interest holders for the tax year. received before the sale. This includes
Do not deduct any amounts paid or For amounts received from an
installment sale, the holding period rule in nontaxable dividends from utility company
accrued for residual interests in the stock and mutual funds. Also, adjust the
REMIC. effect in the year of sale will determine the
treatment of amounts received as basis for any stock splits.
Line 10—Other interest.— Do not See section 852(f) for the treatment of
include interest deducted on line 9 or long-term or short-term capital gain.
Report every sale or exchange of certain load charges incurred in acquiring
interest on indebtedness incurred or stock in a mutual fund with a reinvestment
continued to purchase or carry obligations property in detail, even though there is no
gain or loss. right.
on which the interest is wholly exempt
Page 4
 Increase the cost or other basis by any interests in the REMIC. See section Tax Matters Person section on page 4
expense of sale, such as broker's fee, 860F(a)(4) for the definition of a qualified of Form 1066.
commission, and option premium, before liquidation.
making an entry in column (e), unless the Additional Information
REMIC reported net sales price in column Part II—Tax on Net Income From Be sure to answer the questions and
(d). Foreclosure Property provide other information in items E
For details, see Pub. 551, Basis of For a definition of foreclosure property, through L.
Assets. see instructions on page 6 for Schedule Item E—Type of entity.— Check the box
L, line 1c. Net income from foreclosure for the entity type of the REMIC
Schedule J property must also be included in the recognized under state or local law. If the
computation of taxable income (or net REMIC is not a separate entity under
Part I—Tax on Net Income from loss) shown in Section I, page 1, Form
Prohibited Transactions state or local law, check the box for
1066. “Segregated Pool of Assets,” and state
Do not net losses from prohibited Line 6—Gross income from the name and type of entity which owns
transactions against income or gains from foreclosure property.— Do not include the assets in the spaces provided.
prohibited transactions in determining the on line 6 amounts described in section Item F—Number of residual interest
amounts to enter on lines 1a through 1d. 856(c)(3)(A), (B), (C), (D), (E), or (G). holders.— Enter the number of persons
These losses are not deductible in Line 8—Deductions.— Only those who were residual interest holders at any
computing net income from prohibited expenses which are directly connected time during the tax year.
transactions. with the production of the income shown Item G—Consolidated REMIC
Note: For purposes of lines 1a and 1d, on line 7 may be deducted to figure net proceedings.— Generally, the tax
the term “prohibited transactions” does income from foreclosure property. treatment of REMIC items is determined
not include any disposition that is required Allowable deductions include depreciation at the REMIC level in a consolidated
to prevent default on a regular interest on foreclosure property, interest accrued REMIC proceeding, rather than in
where the threatened default resulted on debt of the REMIC attributable to the separate proceedings with individual
from a default on one or more qualified carrying of foreclosure property, real residual interest holders.
mortgages, or to facilitate a clean-up call. estate taxes, and fees charged by an Check the box for Item G if any of the
A clean-up call is the redemption of a independent contractor to manage following applies:
class of regular interests when, by reason foreclosure property. Do not deduct ● The REMIC had more than 10 residual
of prior payments with respect to those general overhead and administrative
interests, the administrative costs expenses. interest holders at any time during the tax
associated with servicing that class year.
Line 10—Tax on net income from ● Any residual interest holder was a
outweigh the benefits of maintaining the foreclosure property.— The REMIC is
class. It does not include the redemption allowed a deduction for the amount of tax nonresident alien or was other than a
of a class in order to profit from a change shown on this line. Include this amount in natural person or estate, unless there
in interest rates. computing the deduction for taxes entered was at no time during the tax year more
Line 1a—Gain from certain on line 11, Section I, page 1, Form 1066. than one holder of the residual interest.
● The REMIC has elected to be subject
dispositions of qualified mortgages.—
Enter the amount of gain from the Part III—Tax on Contributions After the to the rules for consolidated REMIC
disposition of any qualified mortgage Startup Day proceedings.
transferred to the REMIC other than a Do not complete this part if the startup “Small REMICs,” as defined in sections
disposition from: day was before July 1, 1987. For this 860F(e), 6231(a)(1)(B), and the
1. The substitution of a qualified purpose “startup day” means any day regulations of both, are not subject to the
replacement mortgage for a qualified selected by a REMIC which is on or rules for consolidated REMIC
mortgage (or the repurchase in lieu of before the first day on which interests in proceedings but may make an election to
substitution of a defective obligation). the REMIC are issued. be covered by them. This election can be
2. The foreclosure, default, or Line 11—Tax.— Enter the amount of revoked only with the consent of the
imminent default of the mortgage. contributions received during the calendar Commissioner.
3. The bankruptcy or insolvency of the year after the startup day (as defined Item H—Foreign financial accounts.—
REMIC. above). Do not include cash contributions Check the “Yes” box if either 1 OR 2
described below: below applies to the REMIC. Otherwise,
4. A qualified liquidation. check the “No” box:
See section 860F(a) for details and 1. Any contribution to facilitate a
clean-up call or a qualified liquidation. 1. At any time during the 1997
exceptions. calendar year, the REMIC had an interest
Line 1b—Income from nonpermitted 2. Any payment in the nature of a
guarantee. in or signature or other authority over a
assets.— Enter the amount of any bank, securities, or other financial account
income received or accrued during the 3. Any contribution during the 3-month
period beginning on the startup day. in a foreign country; and
year attributable to any asset other than ● The combined value of the accounts
a qualified mortgage or permitted 4. Any contribution to a qualified
reserve fund by any holder of a residual was more than $10,000 at any time during
investment. See section 860G(a) for the calendar year; and
definitions. interest in the REMIC.
● The account was not with a U.S.
Line 1c—Compensation for services.— Attach a schedule showing your
computation. military banking facility operated by a U.S.
Enter the amount of fees or other financial institution.
compensation for services received or
accrued during the year. Designation of Tax Matters Person 2. The REMIC owns more than 50%
(TMP) of the stock in any corporation that would
Line 1d—Gain from the disposition of answer the question “Yes” to item 1
cash flow investments (except from a A REMIC may designate a tax matters above.
qualified liquidation).— Enter the person in the same manner that a
amount of gain from the disposition of any partnership may designate a tax matters Get Form TD F 90-22.1, Report of
“cash flow investment” except from a partner under Temporary Regulations Foreign Bank and Financial Accounts, to
qualified liquidation. A cash flow section 301.6231(a)(7)-1T. When see if the REMIC is considered to have
investment is any investment of amounts applying that section, treat all holders of an interest in or signature or other
received under qualified mortgages for a a residual interest in the REMIC as authority over a financial account in a
temporary period (not more than 13 general partners. The designation may be foreign country.
months) before distribution to holders of made by completing the Designation of

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 If you checked “Yes” for Item H, file reasonably required reserve to provide for but not included on this return, and
Form TD F 90-22.1 by June 30, 1998, full payment of expenses of the REMIC allowable deductions not charged against
with the Department of the Treasury at the or amounts due on regular interests in the book income this year.
address shown on the form. Form TD F event of defaults on qualified mortgages Include in column (e): capital losses
90-22.1 is not a tax return. Do not file it or lower than expected returns on cash over the $3,000 limitation (for a REMIC
with Form 1066. flow investments. No more than 30% of with a startup day before November 12,
The REMIC can get Form TD F 90-22.1 the gross income from such assets may 1991), other nondeductible amounts
from an IRS Distribution Center or by be derived from the sale or disposition of (such as losses from prohibited
calling 1-800-TAX-FORM property held less than 3 months. See transactions and expenses connected
(1-800-828-3676). section 860G(a)(7)(C) for details and with the production of tax-exempt
Also if “Yes” is checked for this exceptions. income), deductions allocable to
question, enter the name of the foreign Line 1c.—Foreclosure property is any prohibited transactions, expenses
country or countries. Attach a separate real property (including interests in real recorded on books not deducted on this
sheet if more space is needed. property), and any personal property return, and taxable income not recorded
Item I—Foreign trust.— The REMIC incident to such real property, acquired on books this year.
may be required to file Form 3520, by the REMIC as a result of the REMIC's
having bid in the property at foreclosure, Schedule Q—Quarterly Notice to
Annual Return To Report Transactions
With Foreign Trusts and Receipt of or having otherwise reduced the property Residual Interest Holder of REMIC
Certain Foreign Gifts, if: to ownership or possession by agreement Taxable Income or Net Loss
● It directly or indirectly transferred
or process of law, after there was a Allocation
property or money to a foreign trust. For default or imminent default on a qualified Attach a separate Copy A, Schedule Q
this purpose, any U.S. person who mortgage held by the REMIC. Generally, (Form 1066), to Form 1066 for each
created a foreign trust is considered a this property ceases to be foreclosure person who was a residual interest holder
transferor. property 2 years after the date that the at any time during the tax year and for
● It is treated as the owner of any part of
REMIC acquired the property. See each quarter in which each person was a
sections 860G(a)(8), 856(e), and residual interest holder.
the assets of a foreign trust under the Regulations section 1.856-6 for more
grantor trust rules. details.
● It received a distribution from a foreign
Note: Solely for purposes of section Paperwork Reduction Act Notice.— We
trust. 860D(a), the determination of whether
For more information, see the ask for the information on this form to
any property is foreclosure property will carry out the Internal Revenue laws of the
Instructions for Form 3520. be made without regard to section United States. You are required to give
Note: An owner of a foreign trust must 856(e)(4). us the information. We need it to ensure
ensure that the trust files an annual Line 7.—Regular interests are interests that you are complying with these laws
information return on Form 3520-A, as in the REMIC that are issued on the and to allow us to figure and collect the
well as U.S. owner and beneficiary startup day with fixed terms and that are right amount of tax.
statements. For details, see Notice 97-34, designated as regular interests, if:
1997-1 C.B. 422. You are not required to provide the
1. Such interest unconditionally information requested on a form that is
The REMIC may be required to file entitles the holder to receive a specified subject to the Paperwork Reduction Act
Form 926, Return by a U.S. Transferor principal amount or other similar amounts; unless the form displays a valid OMB
of Property to a Foreign Corporation, and control number. Books or records relating
Foreign Estate or Trust, or Foreign 2. Interest payments (or similar to a form or its instructions must be
Partnership, to: amounts), if any, with respect to the retained as long as their contents may
● Pay any excise tax due under section
interest at or before maturity are payable become material in the administration of
1491. based on a fixed rate (or at a variable rate any Internal Revenue law. Generally, tax
● Report information required under described in Regulations section returns and return information are
section 6038B. 1.860G-1(a)(3)), or consist of a specified confidential, as required by section 6103.
● Report transfers of property to a foreign portion of the interest payments on The time needed to complete and file
corporation, estate, trust or partnership, qualified mortgages and this portion does this form and related schedule will vary
and not vary during the period that the interest depending on individual circumstances.
● Make elections under section 1492 with is outstanding. The estimated average times are:
respect to those transfers. The interest will meet the requirements
Schedule Q
For more information, see the of 1 above even if the timing (but not the Form 1066 (Form 1066)
Instructions for Form 926. amount) of the principal payments (or
Item L—Sum of the daily accruals.— other similar amounts) is contingent on Recordkeeping.... 28 hr., 13 min. 6 hr., 13 min.
Learning about
Enter the total of the daily accruals for all the extent of prepayments on qualified the law or the
residual interests for the calendar year. mortgages and the amount of income form...................... 6 hr., 41 min. 1 hr., 28 min.
See section 860E(c)(2) for details. from permitted investments. Preparing the
form...................... 9 hr., 19 min. 2 hr., 34 min.
Schedule M—Reconciliation of Copying,
Schedule L—Balance Sheets per assembling, and
Books Residual Interest Holders' Capital sending the form
Accounts to the IRS ............ 32 min. 16 min.
The amounts shown should agree with
the REMIC's books and records. Attach a Show what caused the changes in the If you have comments concerning the
statement explaining any differences. residual interest holders' capital accounts accuracy of these time estimates or
during the tax year. suggestions for making this form and
Line 1a.—Cash flow investments are
The amounts shown should agree with related schedule simpler, we would be
any investments of amounts received
the REMIC's books and records and the happy to hear from you. You can write to
under qualified mortgages for a temporary
balance sheet amounts. Attach a the Tax Forms Committee, Western Area
period (not more than 13 months) before
statement explaining any differences. Distribution Center, Rancho Cordova, CA
distribution to holders of interests in the
Include in column (d): tax-exempt 95743-0001. DO NOT send the tax form
REMIC.
interest income, other tax-exempt income, to this office. Instead, see Where To File
Line 1b.—Qualified reserve assets on page 1.
include any intangible property that is held income from prohibited transactions,
for investment and as part of any income recorded on the REMIC's books

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