§860B Taxation of Holders of Regular Interests

Summary

Regular interests in a REMIC that are not already treated as debt must be treated as debt for tax purposes. Income from these interests must be reported using the accrual method. If you sell one of these interests, part of the gain is treated as ordinary income. That ordinary part is the amount, if any, by which what you would have reported if the interest’s yield were 110 percent of the applicable Federal rate at the start of your holding period exceeds what you actually reported. Special rules about original issue discount appear elsewhere in the tax code.