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Schedule Q (Form 1066) (Rev. 12-2016) Page 2
Instructions for Residual Interest Holder Specific Instructions
Section references are to the Internal Revenue Code unless otherwise noted. Item C—REMIC assets.This information is provided only for the use of a
residual interest holder such as a real estate investment trust or domestic
Future Developments building and loan association that needs to know the composition of the
For the latest information about developments related to Schedule Q and its REMIC’s underlying assets.
instructions, such as legislation enacted after they were published, go to Calendar Year Taxpayers and Fiscal Year Taxpayers
www.irs.gov/form1066.
Whose Tax Years End With a Calendar Quarter
Purpose of Schedule Line 1b—Your share of the taxable income (net loss) for the calendar
The real estate mortgage investment conduit (REMIC) uses Schedule Q to quarter. If you're an individual, you must report, as ordinary income or loss,
notify you of your share of the REMIC’s quarterly taxable income (or net the total of the amounts shown on line 1b of Schedule Q for each quarter
loss), the excess inclusion with respect to your interest, and your share of the included in your tax year. You report the total on Schedule E (Form 1040),
REMIC’s section 212 expenses for the quarter. Part IV, column (d), after applying any basis limitations. If you aren't an
Keep your copy of this schedule for your records. Don't file it with your tax individual, report the amounts as instructed on your tax return.
return. Line 2c—Excess inclusion for the calendar quarter for your residual
Tax treatment of REMIC items. The REMIC isn't subject to income tax, interest. The total of the amounts shown on line 2c for all quarters included
except on net income from prohibited transactions, net income from in your tax year is the smallest amount you may report for that year as your:
foreclosure property, and contributions made after the startup day. However, • Taxable income or
you're liable for tax on your share of the REMIC’s taxable income, whether or • Alternative minimum taxable income (AMTI).
not distributed, and you must include your share on your income tax return.
Generally, you must report REMIC items shown on your Schedule Q (and any Except where necessary or appropriate to prevent avoidance of federal
attached schedules) or similar statement consistent with the way the REMIC income tax the preceding sentence doesn't apply to a financial institution
treated the items on the return it filed. This rule doesn't apply if your REMIC entitled to relief under section 1616(c)(4) of the Small Business Job
falls within the “small REMIC” exception and doesn't elect to be subject to Protection Act of 1996, Pub. Law No. 104-188, 110 Stat. 1755 (August 20,
the consolidated entity-level audit procedures. 1996) (the Act). That provision generally allows certain financial institutions to
continue using the rules of section 860E(a)(2) prior to its amendment by the
If your treatment on your original or amended return is (or may be) Act. (Special rules apply to members of affiliated groups filing consolidated
inconsistent with the REMIC’s treatment, or if the REMIC was required to file returns and to which section 1616(c)(4) of the Act applies. See sections
but hasn't filed a return, you must file Form 8082, Notice of Inconsistent 860E(a)(3) and (4) prior to their amendment by the Act.) The line 2c amount is
Treatment or Administrative Adjustment Request (AAR), with your original or treated as “unrelated business taxable income” if you're an exempt
amended return to identify and explain the inconsistency (or to note that a organization subject to the unrelated business tax under section 511. If
REMIC return hasn't been filed). See sections 860F(e) and 6222 for the you're an individual, enter this amount as an item of information on Schedule
inconsistent treatment rules. E (Form 1040), Part IV, column (c). If you must also report this amount as
Errors. If you believe the REMIC has made an error on your Schedule Q, your taxable income (or AMTI), enter the amount shown on line 2c on the
notify the REMIC and ask for a corrected Schedule Q. Don't change any taxable income (or AMTI) line of your return and write “Sch. Q” on the dotted
items on your copy. Be sure that the REMIC sends a copy of the corrected line to the left of the entry space.
Schedule Q to the IRS. If you're unable to reach an agreement with the Line 3b—Your share of section 212 expenses for the calendar quarter. If
REMIC about the inconsistency, you must file Form 8082 as explained in the you're an individual or other pass-through interest holder (as defined in
preceding paragraph. Temporary Regulations section 1.67-3T), you must report as ordinary income
Limitation on losses. Generally, you may not claim your share of the the total of the amounts shown on line 3b of Schedule Q for each quarter
quarterly net loss from a REMIC that is greater than the adjusted basis of included in your tax year. This amount must be reported in addition to your
your residual interest in the REMIC at the end of the calendar quarter share of taxable income (net loss) determined above. If you're an individual,
(determined without regard to your share of the net loss of the REMIC for report this total on Schedule E (Form 1040), Part IV, column (e). If you aren't
that quarter). Any loss disallowed because it exceeds your adjusted basis is an individual, report the amounts as instructed on your tax return.
treated as incurred by the REMIC in the following quarter, but only for the If you're an individual and itemize your deductions on your return, you may
purpose of offsetting your share of REMIC taxable income for that quarter. be able to deduct the total of your expenses as a miscellaneous itemized
The following items increase your basis. deduction. It should be included with the other miscellaneous deductions
• Money and your adjusted basis in property contributed to the REMIC. that are subject to the 2% of adjusted gross income (AGI) limit.
• Your share of the REMIC’s taxable income. Fiscal Year Taxpayers Whose Tax Years Don't End
• Any income reported under section 860F(b)(1)(C)(ii). With a Calendar Quarter
The following items decrease your basis. The same rules explained above for calendar year taxpayers apply, except
• Money and the fair market value of property distributed to you. that you must figure the amount to report from lines 1b, 2c, and 3b based on
• Your share of the REMIC’s losses. 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
• Any deduction claimed under section 860F(b)(1)(D)(ii). applicable) by the number of days in that quarter. Multiply the result by your
Passive activity limitations under section 469. Amounts includible in percentage of ownership of all residual interests for each day of your tax year
income (or deductible as a loss) by a residual interest holder are treated as included in that quarter.
portfolio income (loss). Such income (or loss) isn't taken into account in Line 1b. Total the daily amounts of taxable income (net loss) for the
determining the loss from a passive activity under section 469. overlapping quarters. Add these amounts to the amounts shown on line 1b
Excise taxes on excess inclusions of REMIC residual interests.Use Form for the full quarters included in your tax year. Report the resulting income or
8831, Excise Taxes on Excess Inclusions of REMIC Residual Interests, to loss in the same manner as explained above for calendar year taxpayers.
report and pay the: Line 2c. Total the daily amounts for the overlapping quarters. Subtract this
• Excise tax due under section 860E(e)(1) if you transferred a residual interest total from your share of the taxable income for the part of the quarter
in a REMIC to a disqualified organization, included in your tax year, as previously figured. Add the resulting amounts
for the overlapping quarters to the amounts shown on line 2c for the full
• Amount due under Regulations section 1.860E-2(a)(7)(ii) if the tax under quarters included in your tax year and report it in the same manner as
section 860E(e)(1) is to be waived, or explained above for calendar year taxpayers.
• Excise tax due under section 860E(e)(6) if the residual interest holder is a Line 3b. Total the daily amounts of section 212 expenses for the overlapping
pass-through entity with interests held by a disqualified organization. quarters. Add these amounts to the amounts shown on line 3b for the full
See Form 8831 for more details and for definitions of “disqualified quarters included in your tax year. Report the resulting amount in the same
organization” and “pass-through entity.” manner as explained above for calendar year taxpayers.
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