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Schedule Q (Form 1066) (Rev. 9-2018) Page 2
Instructions for Residual Interest Holder See Form 8831 for more details and for definitions of “disqualified
organization” and “pass-through entity.”
Section references are to the Internal Revenue Code unless otherwise noted.
Future Developments Specific Instructions
For the latest information about developments related to Schedule Q and its Item C—REMIC assets.This information is provided only for the use ofa
instructions, such as legislation enacted after they were published, go to residual interest holder such as a real estate investment trust ordomestic
www.irs.gov/Form1066. building and loan association that needs to know thecomposition of the
REMIC’s underlying assets.
What’s New Calendar Year Taxpayers and Fiscal Year Taxpayers
Beginning January 1, 2018, section 212 expenses can’t be deducted as a Whose Tax Years End With a Calendar Quarter
miscellaneous itemized deduction by individuals who itemize deductions
because the Tax Cuts and Jobs Act suspended miscellaneous itemized Line 1b—Your share of the taxable income (net loss) for the calendar
deductions for tax years 2018 through 2025. quarter. If you’re an individual, you must report, as ordinary income orloss,
the total of the amounts shown on line 1b of Schedule Q for eachquarter
Purpose of Schedule included in your tax year. You report the total onSchedule E (Form 1040),
The real estate mortgage investment conduit (REMIC) uses Schedule Q to Part IV, column (d), after applying any basis limitations. If you aren’t an
notify you of your share of the REMIC’s quarterly taxable income (or net individual,report the amounts as instructed on your tax return.
loss), the excess inclusion with respect to your interest, and your share of the Line 2c—Excess inclusion for the calendar quarter for your residual
REMIC’s section 212 expenses for the quarter. interest. The total of the amounts shown on line 2c for all quartersincluded
Keep your copy of this schedule for your records. Don’t file it with your tax in your tax year is the smallest amount you may report for thatyear as your
return. taxable income or, if applicable, alternative minimum taxable income (AMTI).
Tax treatment of REMIC items. The REMIC isn’t subject to income tax, Except where necessary or appropriate to prevent avoidance of federal
except on net income from prohibited transactions, net income from income tax, the preceding sentence doesn’t apply to a financial institution
foreclosure property, and contributions made after the startup day.However, entitled to relief under section 1616(c)(4) of the Small Business Job
you’re liable for tax on your share of the REMIC’s taxableincome, whether or Protection Act of 1996, Pub. Law No. 104-188, 110 Stat. 1755 (August 20,
not distributed, and you must include your share onyour income tax return. 1996) (the Act). That provision generally allows certain financial institutions to
Generally, you must report REMIC items shownon your Schedule Q (and any continue using the rules of section 860E(a)(2) prior to its amendment by the
attached schedules) or similar statementconsistent with the way the REMIC Act. (Special rules apply to members of affiliated groups filing consolidated
treated the items on the return it filed. returns and to which section 1616(c)(4) of the Act applies. See sections
860E(a)(3) and (4) prior to their amendment by the Act.) The line 2c amount is
If your treatment on your original return is (or may be) inconsistent with the treated as “unrelated business taxable income” if you’re an exempt
REMIC’s treatment, or if the REMIC was required to file but hasn’t filed a organization subject to the unrelated business tax under section 511. If
return, you must file Form 8082, Notice of Inconsistent Treatment or you’re an individual, enter this amount as an item of information on Schedule
Administrative Adjustment Request (AAR), with your original return to identify E (Form 1040), Part IV, column (c). If you must also report this amount as
and explain the inconsistency (or to note that a REMIC return hasn’t been your taxable income (or AMTI), enter the amount shown on line 2c on the
filed). See sections 860F(e) and 6222 for the inconsistent treatment rules. taxable income (or AMTI) line of your return and write “Sch. Q” on the dotted
Errors. If you believe the REMIC has made an error on your Schedule Q, line to the left of the entry space.
notify the REMIC and ask for a corrected Schedule Q. Don’t change any Line 3b—Your share of section 212 expenses for the calendar quarter. If
items on your copy. Be sure that the REMIC sends a copy of thecorrected you’re an individual or other pass-through interest holder (asdefined in
Schedule Q to the IRS. If you’re unable to reach anagreement with the Temporary Regulations section 1.67-3T), you must report asordinary income
REMIC about the inconsistency, you must file Form8082 as explained in the the total of the amounts shown on line 3b of Schedule Qfor each quarter
preceding paragraph. included in your tax year. This amount must be reportedin addition to your
Limitation on losses. Generally, you may not claim your share of the share of taxable income (net loss) determined above. Ifyou’re an individual,
quarterly net loss from a REMIC that is greater than the adjusted basis of report this total on Schedule E (Form 1040), Part IV,column (e). If you aren’t
your residual interest in the REMIC at the end of the calendar quarter an individual, report the amounts as instructedon your tax return.
(determined without regard to your share of the net loss of the REMIC for
that quarter). Any loss disallowed because it exceeds your adjusted basisis Fiscal Year Taxpayers Whose Tax Years Don’t End
treated as incurred by the REMIC in the following quarter, but only forthe With a Calendar Quarter
purpose of offsetting your share of REMIC taxable income for thatquarter. The same rules explained above for calendar year taxpayers apply, except
The following items increase your basis. that you must figure the amount to report from lines 1b, 2c, and 3b based on
• Money and your adjusted basis in property contributed to theREMIC. your tax year. For each calendar quarter that overlaps the beginning or end
of your tax year, divide the amount shown on line 1a, 2a, or 3a (whichever is
• Your share of the REMIC’s taxable income. applicable) by the number of days in that quarter. Multiply the result by your
• Any income reported under section 860F(b)(1)(C)(ii). percentage of ownership of all residual interests for each day of your tax year
The following items decrease your basis. included in that quarter.
• Money and the fair market value of property distributed to you. Line 1b. Total the daily amounts of taxable income (net loss) for the
overlapping quarters. Add these amounts to the amounts shown on line1b
• Your share of the REMIC’s losses. for the full quarters included in your tax year. Report the resultingincome or
• Any deduction claimed under section 860F(b)(1)(D)(ii). loss in the same manner as explained above for calendar yeartaxpayers.
Passive activity limitations under section 469.Amounts includible in Line 2c. Total the daily amounts for the overlapping quarters. Subtractthis
income (or deductible as a loss) by a residual interest holder are treatedas total from your share of the taxable income for the part of the quarter
portfolio income (loss). Such income (or loss) isn’t taken into accountin included in your tax year, as previously figured. Add the resultingamounts
determining the loss from a passive activity under section 469. for the overlapping quarters to the amounts shown on line 2cfor the full
Excise taxes on excess inclusions of REMIC residual interests.UseForm quarters included in your tax year and report it in the samemanner as
8831, Excise Taxes on Excess Inclusions of REMIC ResidualInterests, to explained above for calendar year taxpayers.
report and pay the: Line 3b. Total the daily amounts of section 212 expenses for theoverlapping
• Excise tax due under section860E(e)(1) if you transferred a residual interest quarters. Add these amounts to the amounts shown on line3b for the full
in a REMIC to adisqualified organization, quarters included in your tax year. Report the resultingamount in the same
manner as explained above for calendar yeartaxpayers.
• Amount due under Regulations section1.860E-2(a)(7)(ii) if the tax under
section 860E(e)(1) is to be waived, or
• Excise tax due under section 860E(e)(6) if the residual interest holderis a
pass-through entity with interests held by a disqualified organization.
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