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Generally, this property ceases to be

Income recorded on the REMIC’s

it from the IRS website at

foreclosure property at the close of the

books but not included on this return,

third tax year following the tax year in

and

Item I — Foreign trust. The REMIC

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which the REMIC acquired the

Allowable deductions not charged

may be required to file Form 3520,

property. See sections 860G(a)(8),

against book income this year.

Annual Return To Report Transactions

856(e), and Regulations section

With Foreign Trusts and Receipt of

Include in column (e):

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1.856-6 for more details.

Certain Foreign Gifts, if:

Capital losses over the $3,000

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It directly or indirectly transferred

Note. Solely for purposes of section

limitation (for a REMIC with a startup

money or property to a foreign trust (for

860D(a), the determination of whether

day before November 12, 1991),

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this purpose, any U.S. person who

any property is foreclosure property will

Other nondeductible amounts (such

created a foreign trust is considered a

be made without regard to section

as losses from prohibited transactions

transferor);

856(e)(4).

and expenses connected with the

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It is treated as the owner of any part

production of tax-exempt income),

Line 7 — Regular interests. These

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of the assets of a foreign trust under

Deductions allocable to prohibited

are interests in the REMIC that are

the grantor trust rules; or

transactions,

issued on the startup day with fixed

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It received a distribution from a

Expenses recorded on books not

terms and that are designated as

foreign trust.

deducted on this return, and

regular interests, if:

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Taxable income not recorded on the

For more information, see the

1. Such interest unconditionally

books this year.

Instructions for Form 3520.

entitles the holder to receive a specified

Note. An owner of a foreign trust must

principal amount or other similar

ensure that the trust files an annual

amounts; and

Schedule Q

information return on Form 3520-A,

2. Interest payments (or similar

Annual Information Return of Foreign

amounts), if any, with respect to the

Quarterly Notice to

Trust With a U.S. Owner. For details,

interest at or before maturity are

Residual Interest Holder

see the Instructions for Form 3520-A.

payable based on a fixed rate (or at a

variable rate described in Regulations

of REMIC Taxable

To report information required under

section 1.860G-1(a)(3)), or consist of a

section 6038B the REMIC may be

Income or Net Loss

specified portion of the interest

required to file Form 926, Return by a

payments on qualified mortgages and

U.S. Transferor of Property to a Foreign

Allocation

this portion does not vary during the

Corporation, or Form 8865, Return of

period that the interest is outstanding.

U.S. Persons With Respect to Certain

Purpose of Schedule

Foreign Partnerships. See the

The interest will meet the

Schedule Q (Form 1066) shows each

instructions for these forms for more

requirements of 1 even if the timing (but

residual interest holder’s share of the

information.

not the amount) of the principal

REMIC’s quarterly taxable income (or

Item L — Sum of the daily accruals.

payments (or other similar amounts) is

net loss), the excess inclusion for the

Enter the total of the daily accruals for

contingent on the extent of

residual interest holder’s interest, and

all residual interests for the calendar

prepayments on qualified mortgages

the residual interest holder’s share of

year. See section 860E(c)(2) for details.

and the amount of income from

the REMIC’s section 212 expenses for

permitted investments.

Schedule L

the quarter.

An interest will still qualify as a

Balance Sheets per Books

Although the REMIC is not subject to

regular interest even if the specified

income tax (except on net income from

The amounts shown should agree with

principal amount of the regular interest

prohibited transactions, net income

the REMIC’s books and records. Attach

(or the amount of interest accrued on

from foreclosure property, and

a statement explaining any differences.

the regular interest) can be reduced as

contributions made after the startup

a result of the nonoccurrence of one or

Line 1a — Cash flow investments.

day), the residual interest holders are

more contingent payments with respect

These are any investments of amounts

liable for tax on their shares of the

to any reverse mortgage loan held by

received under qualified mortgages for

REMIC’s taxable income, whether or

the REMIC if, on the startup day for the

a temporary period (not more than 13

not distributed, and must include their

REMIC, the sponsor reasonably

months) before distribution to holders of

shares on their tax returns.

believes that all principal and interest

interests in the REMIC.

due under the regular interest will be

General Instructions

Line 1b — Qualified reserve assets.

paid at or prior to the liquidation of the

The term “qualified reserve asset”

For each calendar quarter, complete

REMIC.

means any intangible property which is

Schedule Q (Form 1066) for each

held for investment and as part of a

person who was a residual interest

Schedule M

qualified reserve fund. For a definition

holder at any time during the quarter.

Reconciliation of Residual

of qualified reserve fund, including

File Schedule Q with Form 1066. Give

Interest Holders’ Capital

exceptions, see sections 860G(a)(7)(B)

one copy to the residual interest holder

and (C).

Accounts

by the last day of the month following

the month in which the calendar quarter

Line 1c — Foreclosure property. This

Show what caused the changes in the

ends. Keep one copy with a copy of

is any real property (including interests

residual interest holders’ capital

Form 1066 as part of the REMIC’s

in real property), and any personal

accounts during the tax year.

records.

property incident to such real property,

The amounts shown should agree

acquired by the REMIC as a result of

Specific Instructions

with the REMIC’s books and records

the REMIC’s having bid in the property

and the balance sheet amounts. Attach

at foreclosure, or having otherwise

On each Schedule Q, enter the name,

a statement explaining any differences.

reduced the property to ownership or

address, and identifying number for

possession by agreement or process of

Include in column (d):

each residual interest holder and

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law, after there was a default or

Tax-exempt interest income,

REMIC. For each residual interest

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imminent default on a qualified

Other tax-exempt income,

holder that is an individual, you must

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mortgage held by the REMIC.

Income from prohibited transactions,

enter the residual interest holder’s

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Instructions For Form 1066 - U.s. Real Estate Mortgage Investment Conduit (Remic) Income Tax Return - 2009 Page 7

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