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USC Title 26 enacted through 2008

§ 860F. Other rules

 
(a)
100 percent tax on prohibited transactions
 
(1)
Tax imposed
 
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.
 
(2)
Prohibited transaction
 
For purposes of this part, the term "prohibited transaction" means -
 
(A)
Disposition of qualified mortgage
 
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.
 
(B)
Income from nonpermitted assets
 
The receipt of any income attributable to any asset which is neither a qualified mortgage nor a permitted investment.
 
(C)
Compensation for services
 
The receipt by the REMIC of any amount representing a fee or other compensation for services.
 
(D)
Gain from disposition of cash flow investments
 
Gain from the disposition of any cash flow investment other than pursuant to any qualified liquidation.
 
(3)
Determination of net income
 
For purposes of paragraph (1), the term "net income derived from prohibited transactions" means the excess of the gross income from prohibited transactions over the deductions allowed by this chapter which are directly connected with such transactions; except that there shall not be taken into account any item attributable to any prohibited transaction for which there was a loss.
 
(4)
Qualified liquidation
 
For purposes of this part -
 
(A)
In general
 
The term "qualified liquidation" means a transaction in which -
 
(i)
the REMIC adopts a plan of complete liquidation,
 
(ii)
such REMIC sells all its assets (other than cash) within the liquidation period, and
 
(iii)
all proceeds of the liquidation (plus the cash), less assets retained to meet claims, are credited or distributed to holders of regular or residual interests on or before the last day of the liquidation period.
 
(B)
Liquidation period
 
The term "liquidation period" means the period -
 
(i)
beginning on the date of the adoption of the plan of liquidation, and
 
(ii)
ending at the close of the 90th day after such date.
 
(5)
Exceptions
 
Notwithstanding subparagraphs (A) and (D) of paragraph (2), the term "prohibited transaction" shall not include any disposition -
 
(A)
required to prevent default on a regular interest where the threatened default resulted from a default on 1 or more qualified mortgages, or
 
(B)
to facilitate a clean-up call (as defined in regulations).
 
(b)
Treatment of transfers to the REMIC
 
(1)
Treatment of transferor
 
(A)
Nonrecognition gain or loss
 
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.
 
(B)
Adjusted bases of interests
 
The adjusted bases of the regular and residual interests received in a transfer described in subparagraph (A) shall be equal to the aggregate adjusted bases of the property transferred in such transfer. Such amount shall be allocated among such interests in proportion to their respective fair market values.
 
(C)
Treatment of nonrecognized gain
 
If the issue price of any regular or residual interest exceeds its adjusted basis as determined under subparagraph (B), for periods during which such interest is held by the transferor (or by any other person whose basis is determined in whole or in part by reference to the basis of such interest in the hand of the transferor) -
 
(i)
in the case of a regular interest, such excess shall be included in gross income (as determined under rules similar to rules of section 1276(b)), and
 
(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.
 
(D)
Treatment of nonrecognized loss
 
If the adjusted basis of any regular or residual interest received in a transfer described in subparagraph (A) exceeds its issue price, for periods during which such interest is held by the transferor (or by any other person whose basis is determined in whole or in part by reference to the basis of such interest in the hand of the transferor) -
 
(i)
in the case of a regular interest, such excess shall be allowable as a deduction under rules similar to the rules of section 171, and
 
(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.
 
(2)
Basis to REMIC
 
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.
 
(c)
Distributions of property
 
If a REMIC makes a distribution of property with respect to any regular or residual interest -
 
(1)
notwithstanding any other provision of this subtitle, gain shall be recognized to such REMIC on the distribution in the same manner as if it had sold such property to the distributee at its fair market value, and
 
(2)
the basis of the distributee in such property shall be its fair market value.
 
(d)
Coordination with wash sale rules
 
For purposes of section 1091 -
 
(1)
any residual interest in a REMIC shall be treated as a security, and
 
(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
 
(B)
subsections (a) and (e) of such section shall be applied by substituting "6 months" for "30 days" each place it appears.
 
(e)
Treatment under subtitle F
 
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.








Tax Code (Internal Revenue Code) Section Index


U.S. GAAP by Codification Topic
 
105 GAAP Hierarchy
105 GAAP History

205 Presentation of Financial Statements
205-20 Discontinued Operations
210 Balance Sheet
210-20 Offsetting
220 Comprehensive Income
225 Income Statement
225-20 Extraordinary and Unusual Items
230 Statement of Cash Flows
250 Accounting Changes and Error Corrections
260 Earnings per Share
270 Interim Reporting

310 Impairment of a Loan
320 Investment Securities
320 Other-Than-Temporary Impairments, FSP FAS 115-2
320-10-05 Overview of Investments in Other Entities
320-10-35 Reclassification of Investments in Securities
323-10 Equity Method Investments
323-30 Investments in Partnerships and Joint Ventures
325-20 Cost Method Investments
330 Inventory

340-20 Capitalized Advertising Costs
350-20 Goodwill
350-30 Intangibles Other than Goodwill
350-40 Internal-Use Software
350-50 Website Development Costs
360 Property, Plant and Equipment
360-20 Real Estate Sales

410 Asset Retirement and Environmental Obligations
420 Exit or Disposal Cost Obligations
450 Contingencies
450-20 Loss Contingencies
450-30 Gain Contingencies
480 Redeemable Financial Instruments

505-20 Stock Dividends, Stock Splits
505-30 Treasury Stock

605 SEC Staff Accounting Bulletin, Topic 13
605-25 Revenue Recognition - Multiple Element Arrangements

715-30 Defined Benefit Plans - Pension
718 Share-Based Payment
730 Research and Development
730-20 Research and Development Arrangements

805 Business Combinations
810 Consolidation
810 Noncontrolling Interests
810 Consolidation of Variable Interest Entities, SFAS 167

815 Derivatives and Hedging Overview

820 Fair Value Measurements
820 Fair value when the markets are not active, FSP FAS 157-4
825 Fair Value Option

830 Foreign Currency Matters
830-20 Foreign Currency Transactions
830-30 Translation of Financial Statements
835 Interest
835-20 Capitalization of Interest
835-30 Imputation of Interest

840 Leases
840-20 Operating Leases
840-30 Capital Leases
840-40 Sale-Leaseback Transactions
845 Nonmonetary Transactions

855 Subsequent Events
860-20 Sale of Financial Assets, SFAS 166
860-50 Servicing Assets and Liabilities, SFAS 156

985-20 Costs of software to be sold


U.S. GAAP Codification
Accounting Topics
Tax Code (Internal Revenue Code) Section Index




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