Title 26 — Internal Revenue CodeRelease 119-73

§860B Taxation of holders of regular interests

Title 26 › Subtitle Subtitle A— - Income Taxes › Chapter CHAPTER 1— - NORMAL TAXES AND SURTAXES › Subchapter Subchapter M— - Regulated Investment Companies and Real Estate Investment Trusts › Part PART IV— - REAL ESTATE MORTGAGE INVESTMENT CONDUITS › § 860B

Last updated Apr 6, 2026|Official source

Summary

Treat a regular interest in a REMIC as a debt instrument for tax purposes if it is not already one. Report income from that interest using the accrual method. If you sell a regular interest, the gain is ordinary income up to the excess of (1) the income you would have had if the yield were 110% of the applicable Federal rate at the start of your holding period over (2) the income you actually reported. Special original-issue-discount rules apply under section 1272(a)(6).

Full Legal Text

Title 26, §860B

Internal Revenue Code — Source: USLM XML via OLRC

(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.

(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.

(c)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)For special rules in determining inclusion of original issue discount on regular interests, see section 1272(a)(6).

Reference

Citations & Metadata

Citation

26 U.S.C. § 860B

Title 26 — Internal Revenue Code

Last Updated

Apr 6, 2026

Release point: 119-73