§860D Remic Defined

Summary

Says when an entity counts as a REMIC for tax rules. The entity must have an election that covers the taxable year (and any earlier years). All of its ownership interests must be either regular interests or residual interests. It can have only one class of residual interests, and any payouts on those must be pro rata. By the close of the 3rd month after its startup day and at all times after that, most of its assets must be qualified mortgages and permitted investments. Its taxable year must be a calendar year. The entity must have reasonable steps to keep disqualified organizations from holding residual interests and to provide the information needed under the rules in 860E(e). If the entity is in a qualified liquidation, the asset test above does not apply during the liquidation period. An entity that meets the rules may elect to be treated as a REMIC for its first taxable year by making the election on that year’s tax return. The election applies to that year and later years unless the entity stops being a REMIC during a taxable year; then it is not a REMIC for that year or later. If the stop was accidental, the IRS can decide to treat the entity as if it never stopped, but only if the entity fixes the problem within a reasonable time and the entity and anyone who held an interest agree to make any tax adjustments the IRS requires (consistent with treating the entity as a REMIC or a C corporation).