Title 26 — Internal Revenue CodeRelease 119-73

§860B Taxation of Holders of Regular Interests

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

Last updated Apr 6, 2026|Official source

Summary

If you hold a regular interest in a REMIC, a type of mortgage investment pool, the tax law treats your interest as a debt instrument even if it is not technically one. You must report the income from it using the accrual method of accounting. When you sell the interest, part of your gain can be taxed as ordinary income instead of capital gain: the portion up to the extra income you would have reported if the interest had yielded 110 percent of the applicable federal rate when you bought it.

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