| Instructions for Form 1066 |
2006 Tax Year |
Instructions for Form 1066 - Main Contents
This is archived information that pertains only to the 2006 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.
Form 1066 is used to report the income, deductions, and gains and losses from the operation of a REMIC. In addition, the form
is used by the REMIC
to report and pay the taxes on net income from prohibited transactions, net income from foreclosure property, and contributions
after the startup day.
An entity must file Form 1066 if it elected to be treated as a REMIC for its first tax year (and the election is still in
effect) and it meets the
section 860D(a) requirements listed below.
A REMIC is any entity:
-
To which an election to be treated as a REMIC applies for the tax year and all prior tax years;
-
All of the interests in which are regular interests or residual interests;
-
That has one (and only one) class of residual interests and all distributions, if any, with respect to such interests are
pro
rata;
-
Substantially all of the assets of which consist of qualified mortgages and permitted investments (as of the close of the
third month
beginning after the startup day (defined in the instructions for Item B—Date REMIC started, on page 4) and at all times
thereafter);
-
That has a calendar tax year; and
-
For which reasonable arrangements have been designed to ensure that residual interests are not held by disqualified organizations
(as
defined in section 860E(e)(5)), and information needed to apply section 860E(e) will be made available by the entity.
The last item in the above list does not apply to REMICs with a startup day before April 1, 1988 (or those formed under a
binding contract in
effect on March 31, 1988).
See section 860G for definitions and special rules. See section 860D(a) regarding qualification as a REMIC during a qualified
liquidation.
The election to be treated as a REMIC is made by timely filing, for the first tax year of its existence, a Form 1066 signed
by an authorized
person. Once the election is made, it stays in effect for all years until it is terminated.
For the first tax year of a REMIC's existence, the REMIC must furnish the following in a separate statement attached to the
REMIC's initial return.
-
Information concerning the terms of the regular interests and the designated residual interest of the REMIC, or a copy of
the offering
circular or prospectus containing such information.
-
A description of the prepayment and reinvestment assumptions made in accordance with section 1272(a)(6) and its regulations,
including
documentation supporting the selection of the prepayment assumption.
If the entity ceased to qualify as a REMIC under the requirements of section 860D(a) in 2006, the election to be a REMIC is
terminated for 2006 and
all future years. For 2006 and all future years you must file the tax form for similarly organized entities (corporations,
partnerships, trusts,
etc.).
Generally, REMICs must file the 2006 Form 1066 by April 16, 2007. However, if the entity will file its final return in 2006,
Form 1066 is due by
the 15th day of the 4th month following the date the REMIC ceased to exist.
If you need more time to file a REMIC return, get Form 7004, Application for Automatic 6-Month Extension of Time To File Certain
Business Income
Tax, Information, and Other Returns, to request an automatic 6-month extension. You must file Form 7004 by the regular due
date of the REMIC return.
File the 2006 return for:
-
Calendar year 2006;
-
Short tax years beginning and ending in 2006; or
-
Short tax years beginning and ending in 2007, if the 2007 Form 1066 is not available by the time the REMIC is required to
file its return.
However, the REMIC must show its 2007 tax year on the 2006 Form 1066 and incorporate any tax law changes that are effective
for tax years beginning
after December 31, 2006.
In the case of 2 or 3 above, fill in the tax year space at the top of the form.
If the REMIC's principal business, office, or agency is located in the United States, then file the return at: Internal Revenue
Service Center,
Ogden, UT 84201-0007.
If the REMIC's principal business, office, or agency is located in a foreign country or U.S. possession, then file the return
at: Internal Revenue
Service Center, P.O. box 409101, Ogden, UT 84409.
A REMIC must compute its taxable income (or net loss) using the accrual method of accounting. See section 860C(b).
Under the accrual method, an amount is includible in income when:
-
All the events have occurred that fix the right to receive the income, which is the earliest of the date:
-
the required performance takes place,
-
payment is due, or
-
payment is received and
-
The amount can be determined with reasonable accuracy.
See Regulations section 1.451-1(a) for details.
Generally, an accrual basis taxpayer can deduct accrued expenses in the tax year when:
-
All events that determine the liability have occurred,
-
The amount of the liability can be figured with reasonable accuracy, and
-
Economic performance takes place with respect to the expense.
There are exceptions to the economic performance rule for certain items, including recurring expenses. See section 461(h)
and the related
regulations for the rules for determining when economic performance takes place.
Rounding Off to Whole Dollars
The REMIC may round off cents to whole dollars on its returns and schedules. If the REMIC does round to whole dollars, it
must round all amounts.
To round, drop amounts under 50 cents and increase amounts from 50 to 99 cents to the next dollar (for example, $1.39 becomes
$1 and $2.50 becomes
$3).
If two or more amounts must be added to figure the amount on a line, include cents when adding the amounts and round off only
the total.
The REMIC records must be kept as long as their contents may be material in the administration of any Internal Revenue law.
Copies of the filed tax
returns should also be kept as part of the REMIC's records. See Pub. 583, Starting a Business and Keeping Records, for more
information.
If the REMIC ceases to exist during the year, check the box on Form 1066, page 1, item D(1).
The box on Schedule Q (Form 1066), item E(1) should also be checked to indicate when the schedule is for the final quarter
of the year.
If the REMIC files its return and later becomes aware of changes it must make to income, deductions, etc., the REMIC should
then file an amended:
-
Form 1066 and check the box on page 1, item D(4); and
-
Schedule Q (Form 1066), for each residual interest holder, and check the box at item E(2). Give corrected Schedules Q (Form
1066) to each
residual interest holder.
If a REMIC does not meet the small REMIC exception under sections 860F(e) and 6231, and related regulations, or makes the
election described in
section 6231(a)(1)(B)(ii) not to be treated as a small REMIC, the amended return will be a request for administrative adjustment,
and Form 8082,
Notice of Inconsistent Treatment or Administrative Adjustment Request (AAR), must be filed by the Tax Matters Person. See
sections 860F(e) and 6227
for more information.
If the REMIC's federal return is changed for any reason, it may affect its state return. This would include changes made as
a result of an
examination of the REMIC return by the IRS. Contact the state tax agency where the state return is filed for more information.
If you need more space to report items shown on the forms or schedules, attach separate sheets reporting the items. Use the
same size and format as
on the printed forms. But show the totals on the printed forms. Be sure to put the REMIC's name and employer identification
number (EIN) on each
sheet.
You must complete every applicable entry space on Form 1066. If you attach statements, do not write “See Attached” instead of completing the
entry spaces on this form.
Other Forms and Returns That May Be Required
Form 1096,
Annual Summary and Transmittal of U.S. Information Returns. Use this form to summarize and send information returns
to the Internal Revenue Service
Center.
Form 1098,
Mortgage Interest Statement. This form is used to report the receipt from any individual of $600 or more of mortgage
interest and points in the
course of the REMIC's trade or business.
Forms 1099-A, B, C, INT, LTC, MISC, OID, R, S, and SA.
Use these information returns to report acquisitions or abandonments of secured property; proceeds from broker and
barter exchange transactions;
cancellation of a debt; interest income; certain payments made under a long-term care insurance contract and certain accelerated
death benefits;
miscellaneous income payments; original issue discount; distributions from pensions, annuities, retirement or profit-sharing
plans, individual
retirement arrangement (IRAs), insurance contracts, etc.; proceeds from real estate transactions; and distributions from an
HSA, Archer MSA, or
Medicare Advantage MSA. Also, use these returns to report amounts that were received as a nominee on behalf of another person.
Generally, a REMIC must file Forms 1099-INT and 1099-OID, as appropriate, to report accrued income of $10 or more
of regular interest holders. See
Regulations section 1.6049-7. Also, every REMIC must file Forms 1099-MISC if it makes payments of rents, commissions, or other
fixed or determinable
income (see section 6041) totaling $600 or more to any one person in the course of its trade or business during the calendar
year.
For more details, see the 2006 General Instructions for Forms 1099, 1098, 5498, and W-2G.
Form 8275,
Disclosure Statement, and Form 8275-R, Regulation Disclosure Statement. Use these forms to disclose items or positions
taken on a tax return that
are not otherwise adequately disclosed on the return or that are contrary to Treasury regulations (to avoid parts of the accuracy-related
penalty or
certain preparer penalties).
Form 8300,
Report of Cash Payments Over $10,000 Received in a Trade or Business. Generally, this form is used to report the receipt
of more than $10,000 in
cash or foreign currency in one transaction or a series of related transactions.
Form 8811,
Information Return for Real Estate Mortgage Investment Conduits (REMICs) and Issuers of Collateralized Debt Obligations.
A REMIC uses this form to
provide the information required by Regulations section 1.6049-7(b)(1)(ii). This information will be published in Pub. 938,
Real Estate Mortgage
Investment Conduits (REMICs) Reporting Information (And Other Collateralized Debt Obligations (CDOs)). This publication contains
a directory of
REMICs.
Pub. 938 is not printed. Instead, it is available on CD-ROM or the Internet. See How To Get Forms and Publications on page 1 of the
instructions for details.
Form 8822,
Change of Address. This form is used to inform the IRS of a new REMIC address if the change is made after filing Form
1066.
The REMIC must pay the tax due (page 1, Section II, line 3) in full by the 15th day of the 4th month following the end of
the tax year. Enclose
with Form 1066 a check or money order for the amount due payable to the “United States Treasury.”
The REMIC may be required to deposit its tax using the Electronic Federal Tax Payment System (EFTPS). If this requirement
applies, use EFTPS to
deposit the tax.
If the REMIC is not required to deposit its tax using EFTPS, it may do so voluntarily. To do this, the REMIC must be enrolled
in EFTPS.
For information about EFTPS, visit
www.eftps.gov or see Publication 966, The Secure Way to Pay Your Federal Taxes for Business and Individual
Taxpayers-EFTPS.
Interest.
Interest is charged on taxes not paid by the due date, even if an extension of time to file is granted. Interest is
also charged on penalties
imposed for failure to file, negligence, fraud, substantial valuation misstatements, substantial understatements of tax, and
reportable transaction
understatements; the interest is charged from the due date (including extensions) to the date of payment. The interest charge
is figured at a rate
determined under section 6621.
Late filing penalty.
A penalty may be charged if the return is filed after the due date (including extensions) or the return does not show
all the information required,
unless each failure is due to reasonable cause. If the failure is due to reasonable cause, attach an explanation to the return.
If no taxes are due,
the penalty is $50 for each month or part of a month (up to 5 months) the return is late or does not include the required
information, multiplied by
the total number of persons who were residual interest holders in the REMIC during any part of the REMIC's tax year for which
the return is due. If
tax is due, the penalty is the amount stated above plus 5% of the unpaid tax for each month or part of a month the return
is late, up to a maximum of
25% of the unpaid tax, or if the return is more than 60 days late, a $100 minimum or the balance of tax due on the return,
whichever is smaller.
Late payment penalty.
The penalty for not paying the tax when due is usually ½ of 1% of the unpaid tax for each month or part of a month
the tax is
unpaid. The penalty cannot exceed 25% of the unpaid tax. The penalty will not be charged if you can show reasonable cause
for not paying on time.
Other penalties.
Penalties can also be imposed for negligence, substantial understatements of tax, reportable transaction understatements,
and fraud. See sections
6662, 6662A, and 6663.
Contributions to the REMIC
Generally, no gain or loss is recognized by the REMIC or any of the regular or residual interest holders when property is
transferred to the REMIC
in exchange for an interest in the REMIC. The adjusted basis of the interest received equals the adjusted basis of the property
transferred to the
REMIC.
The basis to the REMIC of property transferred by a regular or residual interest holder is its fair market value immediately
after its transfer.
If the transferor holds a regular interest and if the issue price of the regular interest is more than its adjusted basis,
the excess is included
in income by the regular interest holder for the applicable tax years as if the excess were market discount on a bond and
the holder had made an
election under section 1278(b) to include this market discount currently. If the transferor holds a residual interest and
if the issue price of the
regular interest is more than its adjusted basis, the excess is amortized and included in the residual interest holder's income
ratably over the
anticipated weighted average life of the REMIC (as defined in Regulations section 1.860E-1(a)(3)(iv)).
If the transferor holds a regular interest and if the adjusted basis of the regular interest is more than its issue price,
the regular interest
holder treats the excess as amortizable bond premium subject to the rules of section 171. If the transferor holds a regular
interest and if the
adjusted basis of the regular interest is more than its issue price, the excess is deductible ratably over the anticipated
weighted average life of
the REMIC (as defined in Regulations section 1.860E-1(a)(3)(iv)).
Payments Subject to Withholding at Source
If there are any nonresident alien individuals, foreign partnerships, or foreign corporations as regular interest holders
or residual interest
holders, and the REMIC has items of gross income from sources within the United States (see sections 861 through 865), see
Form 1042, Annual
Withholding Tax Return for U.S. Source Income of Foreign Persons.
Startup day after November 9, 1988.
For a REMIC with a startup day after November 9, 1988, Form 1066 may be signed by any person who could sign the return
of the entity in the absence
of the REMIC election. Thus, the return of a REMIC that is a corporation or trust would be signed by a corporate officer or
a trustee, respectively.
For REMICs with only segregated pools of assets, the return would be signed by any person who could sign the return of the
entity owning the assets of
the REMIC under applicable state law.
Startup day before November 10, 1988.
A REMIC with a startup day before November 10, 1988, may elect to apply the rules for REMICs with a startup day after
November 9, 1988 (as
described in Regulations section 1.860F-4(c)(2)(iii)). Otherwise, Form 1066 must be signed by a residual interest holder or,
as provided in section
6903, by a fiduciary as defined in section 7701(a)(6) who is acting for the REMIC and who has furnished adequate notice as
described in Regulations
section 301.6903-1(b).
In the prior paragraph, the term “ startup day” means any day selected by a REMIC that is on or before the first day on which interests in such
REMIC are issued. Otherwise, “ startup day” is defined in the instructions for Item B—Date REMIC started below.
Paid preparer's information.
If someone prepares the return and does not charge the REMIC, that person should not sign the return or complete the
paid preparer's space.
Generally, anyone who is paid to prepare the REMIC return must sign the return and fill in the “ Paid Preparer's Use Only” area.
The paid preparer must complete the required preparer information and:
Note.
A paid preparer may sign original returns, amended returns, or requests for filing extensions by rubber stamp, mechanical
device, or computer
software program.
Paid Preparer Authorization
If the REMIC wants to allow the IRS to discuss its 2006 tax return with the paid preparer who signed it, check the "Yes" box
in the signature area
of the return. This authorization applies only to the individual whose signature appears in the "Paid Preparer's Use Only"
section of the REMIC's
return. It does not apply to the firm, if any, shown in that section.
If the “Yes” box is checked, the REMIC is authorizing the IRS to call the paid preparer to answer any questions that may arise during
the
processing of its return. The REMIC is also authorizing the paid preparer to:
-
Give the IRS any information that is missing from the return;
-
Call the IRS for information about the processing of the return or the status of any related refund or payment(s); and
-
Respond to certain IRS notices that the REMIC has shared with the preparer about math errors, offsets, and return preparation.
The REMIC is not authorizing the paid preparer to receive any refund check, bind the REMIC to anything (including any additional
tax liability), or
otherwise represent the REMIC before the IRS.
The authorization cannot be revoked. However, the authorization will automatically end no later than the due date (excluding
extensions) for filing
the REMIC's 2007 tax return. If the REMIC wants to expand the paid preparer's authorization or revoke the authorization before
it ends, see Pub. 947,
Practice Before the IRS and Power of Attorney.
Name, address, and EIN.
Print or type the REMIC's legal name and address on the appropriate lines. Include the suite, room, or other unit
number after the street address.
If a preaddressed label is used, include this information on the label. If the Post Office does not deliver mail to the street
address and the REMIC
has a P.O. box, show the box number instead. If the REMIC receives its mail in care of a third party (such as an accountant
or attorney), enter on the
street address line “ C/O” followed by the third party's name and street address or P.O. box. If the REMIC has changed its address since it last
filed a return (including a change to an “ in care of” address), check the box for “ Address change.”
Note.
If a change in address occurs after the return is filed, use Form 8822, Change of Address, to notify the IRS of the new address.
Enter the REMIC's EIN on Form 1066, page 1, item A. If the REMIC does not have its own EIN, it must apply for one.
A REMIC may apply for an EIN:
-
By telephone at 1-800-829-4933 from 7:00 a.m. to 10:00 p.m. Monday through Friday in the REMIC's local time zone.
-
By mailing or faxing Form SS-4, Application for Employer Identification Number.
If the REMIC has not received its EIN by the time the return is due, write “ Applied for” in the space for the EIN. For more details, see
Pub. 583.
Unlike most entities, a REMIC may not apply for an EIN online.
Item B—Date REMIC started.
Enter the “ startup day” selected by the REMIC.
The startup day is the day on which the REMIC issued all of its regular and residual interests. However, a sponsor
may contribute property to a
REMIC in exchange for regular and residual interests over any period of 10 consecutive days and the REMIC may designate any
one of those 10 days as
the startup day. The day so designated is then the startup day, and all interests are treated as issued on that day.
Item C—Total assets at end of tax year.
Enter the total assets of the REMIC. If there are no assets at the end of the tax year, enter the total assets as
of the beginning of the tax year.
Line 1—Taxable interest.
Enter the total taxable interest. “ Taxable interest” is interest that is included in ordinary income from all sources except interest exempt
from tax and interest on tax-free covenant bonds. You may elect to reduce the amount of interest accrued on taxable bonds
by the amount of amortizable
bond premium on those bonds attributable to the current tax year. See sections 171(c) and 171(e) for details.
Line 2—Accrued market discount under section 860C(b)(1)(B).
Enter the amount of market discount attributable to the current tax year determined on the basis of a constant interest
rate under the rules of
section 1276(b)(2).
Line 3—Capital gain or (loss).
Enter the amount shown on page 2, Schedule D, line 12 or 13 (if any).
Line 4—Ordinary gain or (loss).
Enter the net gain or (loss) from Form 4797, Sales of Business Property, Part II.
Line 5—Other income.
Attach a schedule, listing by type and amount, any other taxable income not reported on lines 1 through 4. If there
is only one item of other
income, describe it in parentheses to the left of the entry space on line 5 instead of attaching a schedule. If the REMIC
issued regular interests at
a premium, the net amount of the premium is income that must be prorated over the term of these interests. Include this income
on line 5.
Deductions—(Lines 7 through 14).
Include only deductible amounts on lines 7 through 14. A REMIC is not allowed any of the following deductions in computing
its taxable income.
-
The net operating loss deduction.
-
The deduction for taxes paid or accrued to foreign countries and U.S. possessions.
-
The deduction for charitable contributions.
-
The deduction for depletion under section 611 for oil and gas wells.
-
Losses or deductions allocable to prohibited transactions.
Line 9—Amount accrued to regular interest holders in the REMIC that is deductible as interest.
Regular interests in the REMIC are treated as indebtedness for federal income tax purposes. Enter the amount of interest,
including original issue
discount, accruing to regular interest holders for the tax year. Do not deduct any amounts paid or accrued for residual interests
in the REMIC.
Line 10—Other interest.
Do not include interest deducted on line 9 or interest on indebtedness incurred or continued to purchase or carry
obligations on which the interest
is wholly exempt from income tax. You may elect to include amortization of bond premium on taxable bonds acquired before 1988
unless you elected to
offset amortizable bond premium against the interest accrued on the bond (see the Section I, line 1, instructions). Do not
include any amount
attributable to a tax-exempt bond.
Line 11—Taxes.
If you have to pay tax on net income from foreclosure property, you should include this tax (from Schedule J, line
10) on line 11.
Note.
See section 164(d) for apportionment of taxes on real property between the seller and purchaser.
Enter taxes accrued during the tax year but do not include the following:
-
Federal income taxes (except the tax on net income from foreclosure property);
-
Foreign or U.S. possession income taxes;
-
Taxes not imposed on the REMIC; or
-
Taxes, including state or local sales taxes, that are paid or incurred in connection with an acquisition or disposition of
property. Such
taxes must be treated as a part of the cost of the acquired property or, in the case of a disposition, as a reduction in the
amount realized on the
disposition.
Line 12—Depreciation.
See the instructions for Form 4562, Depreciation and Amortization, or Pub. 946, How To Depreciate Property, to figure
the amount of depreciation to
enter on this line. You must complete and attach Form 4562 if the REMIC placed property in service during 2006, claims a section
179 expense
deduction, or claims depreciation on any car or other listed property.
Line 13—Other deductions.
Attach a schedule, listing by type and amount, any other allowable deductions for which no line is provided on Form
1066. If there is only one item
of other deductions, describe it in parentheses to the left of the entry on line 13 instead of attaching a schedule.
Line 2b—Credit for federal telephone excise tax paid.
If the REMIC was billed after February 28, 2003, and before August 1, 2006, for the federal telephone excise tax on
long distance or bundled
service, the REMIC may be able to request a credit for the tax paid. The REMIC had bundled service if its local and long distance
service was provided
under a plan that does not separately state the charge for local service. The REMIC cannot request the credit if it has already
received a credit or
refund from its service provider. If the REMIC requests the credit, it cannot ask its service provider for a credit or refund
and must withdraw any
request previously submitted to its provider.
The REMIC can request the credit by attaching Form 8913, Credit for Federal Telephone Excise Tax Paid, showing the
actual amount the REMIC paid.
The REMIC also may be able to request the credit based on an estimate of the amount paid. See Form 8913 for details. In either
case, the REMIC must
keep records to substantiate the amount of the credit requested.
Purpose of schedule.
For a REMIC with a startup day before November 12, 1991, use Schedule D to report the sale or exchange of capital
assets. To report sales or
exchanges of property other than capital assets, see Form 4797 and its instructions.
A REMIC with a startup day after November 11, 1991, must use Form 4797 instead of Schedule D because all of its gains
and losses from the sale or
exchange of any property are treated as ordinary gains and losses.
Report every sale or exchange of property in detail, even though there is no gain or loss.
For details, see Pub. 544, Sales and Other Dispositions of Assets.
Capital gain distributions.
On line 7, report the sum of capital gain distributions and the REMIC's share of the undistributed capital gain from
a mutual fund or other
regulated investment company.
For details, see Pub. 564, Mutual Fund Distributions.
Losses on worthless securities.
If any securities that are capital assets become worthless during the tax year, the loss is a loss from the sale or
exchange of capital assets as
of the last day of the tax year.
Losses from wash sales.
The REMIC cannot deduct losses from a wash sale of stock or securities. A wash sale occurs if the REMIC acquires (by
purchase or exchange), or has
a contract or option to acquire, substantially identical stock or securities within 6 months before or after the date of the
sale or exchange. See
section 860F(d) for details.
Installment sales.
If the REMIC sold property (except publicly traded stock or securities) at a gain and will receive any payment in
a tax year after the year of
sale, it must use the installment method and Form 6252, Installment Sale Income, unless it elects not to use the installment
method.
If the REMIC wants to elect out of the installment method, it must report the full amount of the gain on a timely
filed return (including
extensions). If the REMIC filed its original return on time without making the election, it may make the election on an amended
return filed not later
than 6 months after the due date of the return (excluding extensions). Write “ Filed pursuant to section 301.9100-2” at the top of the amended
return.
Column (d)—Sales price.
Enter either the gross sales price or the net sales price from the sale. On sales of stocks and bonds, report the
gross amount as reported to the
REMIC by the REMIC's broker on Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or similar statement. However,
if the broker
advised the REMIC that gross proceeds (gross sales price) minus commissions and option premiums were reported to the IRS,
enter that net amount in
column (d).
Column (e)—Cost or other basis.
In general, the cost or other basis is the cost of the property plus purchase commissions and improvements, minus
depreciation. If the REMIC got
the property in a tax-free exchange, involuntary conversion, or wash sale of stock, it may not be able to use the actual cash
cost as the basis. If
the REMIC uses a basis other than cash cost, attach an explanation.
When selling stock, adjust the basis by subtracting all the nontaxable distributions received before the sale. This
includes nontaxable dividends
from utility company stock and mutual funds. Also, adjust the basis for any stock splits.
See section 852(f) for the treatment of certain load charges incurred in acquiring stock in a mutual fund with a reinvestment
right.
Increase the cost or other basis by any expense of sale, such as broker's fee, commission, and option premium, before
making an entry in column
(e), unless the REMIC reported net sales price in column (d).
For details, see Pub. 551, Basis of Assets.
Part I—Tax on Net Income from Prohibited Transactions
Losses not included.
Do not net losses from prohibited transactions against income or gains from prohibited transactions in determining
the amounts to enter on lines 1a
through 1d. These losses are not deductible in computing net income from prohibited transactions.
For purposes of lines 1a and 1d, the term “ prohibited transactions” does not include any disposition that is required to prevent default on a
regular interest where the threatened default resulted from a default on one or more qualified mortgages, or to facilitate
a clean-up call. A clean-up
call is the redemption of a class of regular interests when, by reason of prior payments with respect to those interests,
the administrative costs
associated with servicing that class outweigh the benefits of maintaining the class. It does not include the redemption of
a class in order to profit
from a change in interest rates.
Line 1a—Gain from certain dispositions of qualified mortgages.
Enter the amount of gain from the disposition of any qualified mortgage transferred to the REMIC other than a disposition
from:
-
The substitution of a qualified replacement mortgage for a qualified mortgage or the repurchase in lieu of substitution of
a defective
obligation;
-
The foreclosure, default, or imminent default of the mortgage;
-
The bankruptcy or insolvency of the REMIC; or
-
A qualified liquidation.
See section 860F(a) for details and exceptions.
Line 1b—Income from nonpermitted assets.
Enter the amount of any income received or accrued during the year attributable to any asset other than a qualified
mortgage or permitted
investment. See section 860G(a) for definitions.
Line 1c—Compensation for services.
Enter the receipt by the REMIC of any amount representing a fee or other compensation for services.
Line 1d—Gain from the disposition of cash flow investments (except from a qualified liquidation).
Enter the amount of gain from the disposition of any cash flow investment except from a qualified liquidation. A “ cash flow investment” is any
investment of amounts received under qualified mortgages for a temporary period (not more than 13 months) before distribution
to holders of interests
in the REMIC. See section 860F(a)(4) for the definition of a qualified liquidation.
Part II—Tax on Net Income From Foreclosure Property
For a definition of foreclosure property, see instructions on page 7 for Schedule L, line 1c. Net income from foreclosure
property must also be
included in the computation of taxable income (or net loss) shown on Form 1066, page 1, Section I.
Line 6—Gross income from foreclosure property.
Do not include on line 6 amounts described in section 856(c)(3)(A), (B), (C), (D), (E), or (G).
Line 8—Deductions.
Only those expenses that are directly connected with the production of the income shown on line 7 may be deducted
to figure net income from
foreclosure property. Allowable deductions include depreciation on foreclosure property, interest accrued on debt of the REMIC
attributable to the
carrying of foreclosure property, real estate taxes, and fees charged by an independent contractor to manage foreclosure property.
Do not deduct
general overhead and administrative expenses.
Line 10—Tax on net income from foreclosure property.
The REMIC is allowed a deduction for the amount of tax shown on this line. Include this amount in computing the deduction
for taxes entered on Form
1066, page 1, Section I, line 11.
Part III—Tax on Contributions After the Startup Day
Do not complete this part if the startup day was before July 1, 1987. For this purpose, startup day means any day selected
by a REMIC that is on or
before the first day on which interests in the REMIC are issued.
Line 11—Tax.
Enter the amount of contributions received during the calendar year after the startup day (as defined in the prior
paragraph). Do not include cash
contributions described next.
-
Any contribution to facilitate a clean-up call or a qualified liquidation.
-
Any payment in the nature of a guarantee.
-
Any contribution during the 3-month period beginning on the startup day.
-
Any contribution to a qualified reserve fund by any holder of a residual interest in the REMIC.
Attach a schedule showing your computation.
Designation of Tax Matters Person (TMP)
A REMIC may designate a TMP in the same manner that a partnership may designate a tax matters partner under Regulations section
301.6231(a)(7)-1.
When applying that section, treat all holders of a residual interest in the REMIC as general partners. The designation may
be made by completing the
Designation of Tax Matters Person section on Form 1066, page 4.
Be sure to answer the questions and provide other information in items E through L.
Item E—Type of entity.
Check the box for the entity type of the REMIC recognized under state or local law. If the REMIC is not a separate
entity under state or local law,
check the box for “ Segregated Pool of Assets,” and state the name and type of entity that owns the assets in the spaces provided.
Item F—Number of residual interest holders.
Enter the number of persons who were residual interest holders at any time during the tax year.
Item G—Consolidated REMIC proceedings.
Generally, the tax treatment of REMIC items is determined at the REMIC level in a consolidated REMIC proceeding, rather
than in separate
proceedings with individual residual interest holders.
Check the box for item G if any of the following apply.
-
The REMIC had more than 10 residual interest holders at any time during the tax year (a husband and wife count as one holder).
-
Any residual interest holder was a nonresident alien, or was other than an individual, a C corporation, or an estate, unless
there was at no
time during the tax year more than one holder of the residual interest.
-
The REMIC has elected to be subject to the rules for consolidated REMIC proceedings.
“ Small REMICs,” as defined in sections 860F(e), 6231(a)(1)(B), and the regulations of both, are not subject to the rules for consolidated
REMIC proceedings, but may make an election to be covered by them. This election can be revoked only with the consent of the
Commissioner.
Item H—Foreign financial accounts.
Check the “ Yes” box if either 1 or 2 below applies to the REMIC. Otherwise, check the “ No” box.
-
At any time during the 2006 calendar year, the REMIC had a financial interest in or signature or other authority over any
foreign financial
account, including bank, securities, or other types of financial accounts in a foreign country (see Form TD F 90-22.1, Report
of Foreign Bank and
Financial Accounts); and
-
The combined value of the accounts was more than $10,000 at any time during the calendar year and
-
The account was not with a U.S. military banking facility operated by a U.S. financial institution.
-
The REMIC owns more than 50% of the stock in any corporation that would answer “Yes” to item 1 above.
If the “ Yes” box is checked:
-
Enter the name of the foreign country or countries. Attach a separate sheet if more space is needed.
-
File Form TD F 90-22.1 by June 30, 2007, with the Department of the Treasury at the address shown on the form. Because TD
F 90-22.1 is not a
tax form, do not file it with Form 1066. You can order Form TD F 90-22.1 by calling 1-800-TAX-FORM (1-800-829-3676) or you
can download it from the
IRS website at
www.irs.gov.
Item I—Foreign trust.
The REMIC may be required to file Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt
of Certain Foreign Gifts, if:
-
It directly or indirectly transferred money or property to a foreign trust (for this purpose, any U.S. person who created
a foreign trust is
considered a transferor);
-
It is treated as the owner of any part of the assets of a foreign trust under the grantor trust rules; or
-
It received a distribution from a foreign trust.
For more information, see the Instructions for Form 3520.
Note.
An owner of a foreign trust must ensure that the trust files an annual information return on Form 3520-A, Annual Information
Return of Foreign
Trust With a U.S. Owner. For details, see the Instructions for Form 3520-A.
To report information required under section 6038B the REMIC may be required to file Form 926, Return by a U.S. Transferor
of Property to a Foreign
Corporation, or Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships. See the instructions for these
forms for more
information.
Item L—Sum of the daily accruals.
Enter the total of the daily accruals for all residual interests for the calendar year. See section 860E(c)(2) for
details.
Schedule L Balance Sheets per Books
The amounts shown should agree with the REMIC's books and records. Attach a statement explaining any differences.
Line 1a—Cash flow investments.
These are any investments of amounts received under qualified mortgages for a temporary period (not more than 13 months)
before distribution to
holders of interests in the REMIC.
Line 1b—Qualified reserve assets.
The term “ qualified reserve asset” means any intangible property which is held for investment and as part of a qualified reserve fund. For a
definition of qualified reserve fund, including exceptions, see sections 860G(a)(7)(B) and (C).
Line 1c—Foreclosure property.
This is any real property (including interests in real property), and any personal property incident to such real
property, acquired by the REMIC
as a result of the REMIC's having bid in the property at foreclosure, or having otherwise reduced the property to ownership
or possession by agreement
or process of law, after there was a default or imminent default on a qualified mortgage held by the REMIC. Generally, this
property ceases to be
foreclosure property at the close of the third tax year following the tax year in which the REMIC acquired the property. See
sections 860G(a)(8),
856(e), and Regulations section 1.856-6 for more details.
Note.
Solely for purposes of section 860D(a), the determination of whether any property is foreclosure property will be made without
regard to section
856(e)(4).
Line 7—Regular interests.
These are interests in the REMIC that are issued on the startup day with fixed terms and that are designated as regular
interests, if:
-
Such interest unconditionally entitles the holder to receive a specified principal amount or other similar amounts; and
-
Interest payments (or similar amounts), if any, with respect to the interest at or before maturity are payable based on a
fixed rate (or at
a variable rate described in Regulations section 1.860G-1(a)(3)), or consist of a specified portion of the interest payments
on qualified mortgages
and this portion does not vary during the period that the interest is outstanding.
The interest will meet the requirements of 1 even if the timing (but not the amount) of the principal payments (or
other similar amounts) is
contingent on the extent of prepayments on qualified mortgages and the amount of income from permitted investments.
An interest will still qualify as a regular interest even if the specified principal amount of the regular interest
(or the amount of interest
accrued on the regular interest) can be reduced as a result of the nonoccurrence of one or more contingent payments with respect
to any reverse
mortgage loan held by the REMIC if, on the startup day for the REMIC, the sponsor reasonably believes that all principal and
interest due under the
regular interest will be paid at or prior to the liquidation of the REMIC.
Schedule M Reconciliation of Residual Interest Holders' Capital Accounts
Show what caused the changes in the residual interest holders' capital accounts during the tax year.
The amounts shown should agree with the REMIC's books and records and the balance sheet amounts. Attach a statement explaining
any differences.
Include in column (d):
-
Tax-exempt interest income,
-
Other tax-exempt income,
-
Income from prohibited transactions,
-
Income recorded on the REMIC's books but not included on this return, and
-
Allowable deductions not charged against book income this year.
Include in column (e):
-
Capital losses over the $3,000 limitation (for a REMIC with a startup day before November 12, 1991),
-
Other nondeductible amounts (such as losses from prohibited transactions and expenses connected with the production of tax-exempt
income),
-
Deductions allocable to prohibited transactions,
-
Expenses recorded on books not deducted on this return, and
-
Taxable income not recorded on the books this year.
Schedule Q Quarterly Notice to Residual Interest Holder of REMIC Taxable Income or Net Loss Allocation
Schedule Q (Form 1066) shows each residual interest holder's share of the REMIC's quarterly taxable income (or net loss),
the excess inclusion for
the residual interest holder's interest, and the residual interest holder's share of the REMIC's section 212 expenses for
the quarter.
Although the REMIC is not subject to income tax (except on net income from prohibited transactions, net income from foreclosure
property, and
contributions made after the startup day), the residual interest holders are liable for tax on their shares of the REMIC's
taxable income, whether or
not distributed, and must include their shares on their tax returns.
For each calendar quarter, complete Schedule Q (Form 1066) for each person who was a residual interest holder at any time
during the quarter. File
Schedule Q with Form 1066. Give one copy to the residual interest holder by the last day of the month following the month
in which the calendar
quarter ends. Keep one copy with a copy of Form 1066 as part of the REMIC's records.
On each Schedule Q, enter the name, address, and identifying number for each residual interest holder and REMIC. For each
residual interest holder
that is an individual, you must enter the residual interest holder's social security number (SSN) (or individual taxpayer
identification number (ITIN)
for a resident or nonresident alien). For all other residual interest holders, you must enter the residual interest holder's
EIN. However, if a
residual interest holder is an IRA, enter the identifying number of the IRA trust. Do not enter the SSN (or ITIN) of the individual
for whom the IRA
is maintained.
Item A—What type of entity is this residual interest holder?
State on this line whether the residual interest holder is an individual, a corporation, an estate, a trust, a partnership,
an exempt organization,
a nominee (custodian), or another REMIC. If the residual interest holder is a nominee, use the following codes to indicate
in parentheses the type of
entity the nominee represents:
I - Individual, C - Corporation, F - Estate or Trust, P - Partnership, E - Exempt Organization, R - REMIC, or
IRA - Individual Retirement Arrangement.
Item B—Residual interest holder's percentage of ownership.
Enter in item B2 the percentage at the end of the calendar quarter. However, if a residual interest holder's percentage
of ownership changed during
the quarter, enter in item B1 the percentage immediately before the change. If there are multiple changes in the percentage
of ownership during the
quarter, attach a statement giving the date and percentage before each change.
Item C—REMIC assets.
Enter in item C the percentage of the REMIC's assets during the calendar quarter represented by each of the following
categories of assets:
-
Real estate assets under section 856(c)(5)(B), and
-
Assets described in section 7701(a)(19)(C) (relating to the definition of a domestic building and loan association).
These percentages must be computed using the average adjusted basis of the assets held during the calendar quarter.
To do this, the REMIC must make
the appropriate computation as of the close of each month, week, or day and then average the monthly, weekly, or daily percentages
for the quarter.
The monthly, weekly, or daily computation period must be applied uniformly during the calendar quarter to both categories
of assets, and may not be
changed in succeeding calendar quarters without IRS consent. If the percentage of the REMIC's assets for either category is
at least 95%, the REMIC
may show “ 95 or more” for that category in item C.
If less than 95% of the assets of the REMIC are real estate assets (as defined in section 856(c)(5)(B)), the REMIC
must also report to any real
estate investment trust that holds a residual interest the information specified in Regulations section 1.860F-4(e)(1)(ii)(B).
Item F—Reconciliation of residual interest holder's capital account.
See the instructions for Schedule M on page 7.
Line 1a—Taxable income (net loss) of the REMIC for the calendar quarter.
Enter the REMIC's taxable income (net loss) for the calendar quarter. The sum of the totals for the 4 quarters in
the calendar year must equal the
amount shown on Form 1066, Section I, line 15.
Line 1b—Your share of the taxable income (net loss) for the calendar quarter.
Enter the residual interest holder's share of the taxable income (net loss) shown on line 1a (determined by adding
the holder's daily portions
under section 860C(a)(2) for each day in the quarter the holder held the residual interest). If line 1a is a loss, enter the
residual interest
holder's full share of the loss, without regard to the adjusted basis of the residual interest holder's interest in the REMIC.
Line 2a—Sum of the daily accruals under section 860E for all residual interests for the calendar quarter.
Enter the product of the sum of the adjusted issue prices of all residual interests at the beginning of the quarter
and 120% of the long-term
federal rate (determined on the basis of compounding at the end of each quarter and properly adjusted for the length of such
quarter). See section
860E(c) for details.
Line 2b—Sum of the daily accruals under section 860E for your interest.
Enter zero if line 2a is zero. Otherwise, divide the amount shown on line 2a by the number of days in the quarter.
Multiply the result by the
residual interest holder's percentage of ownership for each day in the quarter that the residual interest holder owned the
interest. Total the daily
amounts and enter the result.
Line 3—Complete lines 3a and 3b only for residual interest holders who are individuals or other pass-through interest holders
(as defined in Temporary Regulations section 1.67-3T).
Line 3a—Section 212 expenses of the REMIC for the calendar quarter.
Enter the REMIC's allocable section 212 expenses for the calendar quarter. The term “ allocable section 212 expenses” means the aggregate
amount of the expenses paid or accrued in the calendar quarter for which a deduction is allowable under section 212 in determining
the taxable income
of the REMIC for the calendar quarter.
Section 212 expenses generally include operational expenses such as:
Line 3b—Your share of section 212 expenses for the calendar quarter.
Enter the residual interest holder's share of the amount shown on line 3a.
Privacy Act and Paperwork Reduction Act Notice.
We ask for the information on this form to carry out the Internal Revenue laws of the United States. You are required to give
us the information.
We need it to ensure that you are complying with these laws and to allow us to figure and collect the right amount of tax.
Section 6109 requires
return preparers to provide their identifying numbers on the return.
You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless
the form displays a valid
OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents may
become material in the
administration of any Internal Revenue law. Generally, tax returns and return information are confidential, as required by
section 6103.
The time needed to complete and file this form and related schedule will vary depending on individual circumstances. The estimated
average times
are:
| |
Form 1066 |
Schedule Q
(Form 1066) |
| Recordkeeping |
32 hr., 3 min.
|
6 hr., 27 min.
|
| Learning about the law or the form |
8 hr., 51 min.
|
1 hr., 40 min.
|
| Preparing the form |
12 hr., 33 min.
|
1 hr., 52 min.
|
| Copying, assembling, and sending the form to the IRS |
48 min.
|
|
If you have comments concerning the accuracy of these time estimates or suggestions for making this form and related schedule
simpler, we would be
happy to hear from you. You can write to the Internal Revenue Service, Tax Products Coordinating Committee, SE:W:CAR:MP:T:T:SP,
1111 Constitution Ave.
NW, IR-6406, Washington, DC 20224. Do not send the tax form to this office. Instead, see Where To File on page 2.
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