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Department of the Treasury
Internal Revenue Service
2023

Instructions for Form 1066

U.S. Real Estate Mortgage Investment Conduit
(REMIC) Income Tax Return

Section references are to the Internal Revenue Code How To Get Forms and Publications
unless otherwise noted.
Internet. You can access the IRS website at IRS.gov 24
Future Developments hours a day, 7 days a week to:
• Download forms, including talking tax forms,
For the latest information about developments related to instructions, and publications;
Form 1066 and its instructions, such as legislation • Use the online Internal Revenue Code, regulations, or
enacted after they were published, go to IRS.gov/ other official guidance;
Form1066. • Get information on starting and operating a small
business;
What’s New • Order IRS products online;
• Research your tax questions online;
Increased failure-to-file penalty. The minimum penalty • Search publications online by topic or keyword;
under section 6651(a) for the failure to file Form 1066 • View Internal Revenue Bulletins (IRBs) published in the
within 60 days of the due date has increased to the last few years; and
smaller of the tax due or $485. The penalty under section • Sign up to receive local and national tax news by email.
6698 that the IRS may charge when no tax is due has
increased to $235 for each person who was a residual
interest holder in the REMIC at any time during the year General Instructions
for each month or part of a month the return is late, for up
to 12 months. For more information, see Late filing Purpose of Form
penalty, later. File Form 1066 to report the income, deductions, and
gains and losses from the operation of a REMIC. In
Total assets at end of the tax year. If there are no addition, the form is filed by the REMIC to report and pay
assets at the end of the year enter -0-. the taxes on net income from prohibited transactions, net
Reminders income from foreclosure property, and contributions after
the startup day.
Bipartisan Budget Act. The Bipartisan Budget Act of
2015 (BBA) created a new centralized partnership audit Who Must File
regime that applies to a REMIC for tax years beginning An entity must file Form 1066 if it elected to be treated as
after 2017. Under the centralized partnership audit a REMIC for its first tax year (and the election is still in
regime, any adjustments to the partnership-related items effect) and it meets the section 860D(a) requirements
of a REMIC are determined at the REMIC level. listed below.
Partnership representative (PR). Under the centralized A REMIC is any entity that:
partnership audit regime, a REMIC is required to • Elects to be treated as a REMIC for the tax year and all
designate a PR if it had more than one residual interest prior tax years;
holder at any time during the tax year and it didn't elect out • All of the interests in which are regular interests or
of the centralized partnership audit regime. The PR will residual interests;
have the sole authority to act on behalf of the REMIC • Has one (and only one) class of residual interests and
under the centralized partnership audit regime. The all distributions, if any, with respect to such interests are
person designated by the REMIC as the PR must have a pro rata;
substantial presence in the United States. For more • Substantially all of the assets consist of qualified
information, see Designation of Partnership mortgages and permitted investments as of the close of
Representative, later. the third month beginning after the startup day (defined in
the instructions for Item B—Date REMIC started, later)
Photographs of Missing Children and at all times thereafter;
The IRS is a proud partner with the National Center for • Has a calendar tax year; and
Missing & Exploited Children® (NCMEC). Photographs of • For which reasonable arrangements have been
missing children selected by the Center may appear in designed to ensure that residual interests aren't held by
instructions on pages that would otherwise be blank. You disqualified organizations (as defined in section 860E(e)
can help bring these children home by looking at the (5)), and information needed to apply section 860E(e) will
photographs and calling 1-800-THE-LOST be made available by the entity.
(1-800-843-5678) if you recognize a child.

Sep 21, 2023 Cat. No. 64231R

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The last item in the above list doesn't apply to Private Delivery Services (PDSs)
! REMICs with a startup day before April 1, 1988 (or REMICs can use certain PDSs designated by the IRS to
CAUTION those formed under a binding contract in effect on
March 31, 1988). meet the “timely mailing as timely filing” rule for tax
returns. Go to IRS.gov/PDS for the current list of PDSs.
See section 860G for definitions and special rules. See The PDS can tell you how to get written proof of the
section 860D(a) regarding qualification as a REMIC mailing date.
during a qualified liquidation.
For the IRS mailing address to use if you’re using a
Making the Election PDS, go to IRS.gov/PDSstreetAddresses.
The election to be treated as a REMIC is made by timely
filing, for the first tax year of its existence, a Form 1066 PDSs can't deliver items to P.O. boxes. You must
and having it signed by an authorized person. Once the ! use the U.S. Postal Service to mail any item to an
election is made, it stays in effect for all years until it is CAUTION IRS P.O. box address.
terminated.
Where To File
First Tax Year If the REMIC's principal business, office, or agency is
For the first tax year of a REMIC's existence, the REMIC located in the United States, then file the return at:
must furnish the following in a separate statement
attached to the REMIC's initial return. Department of the Treasury
• Information concerning the terms of the regular Internal Revenue Service
interests and the designated residual interest of the Ogden, UT 84201-0007
REMIC, or a copy of the offering circular or prospectus
containing such information. If the REMIC's principal business, office, or agency is
• A description of the prepayment and reinvestment located in a foreign country or U.S. possession, then file
assumptions made in accordance with section 1272(a)(6) the return at:
and its regulations, including documentation supporting
the selection of the prepayment assumption. Internal Revenue Service
P.O. Box 409101
Termination of Election Ogden, UT 84409
If the entity ceased to qualify as a REMIC under the
requirements of section 860D(a) in 2023, the election to Accounting Method
be a REMIC is terminated for 2023 and all future years.
A REMIC must compute its taxable income (or net loss)
For 2023 and all future years, you must file the tax form for
using the accrual method of accounting. See section
similarly organized entities (corporations, partnerships,
860C(b). For more information about the accrual method
trusts, etc.).
of accounting, see Pub. 538.
When To File
Rounding Off to Whole Dollars
Generally, REMICs must file the 2023 Form 1066 by
The REMIC may round off cents to whole dollars on its
March 15, 2024. However, if the entity will file its final
returns and schedules. If the REMIC does round to whole
return in 2023, Form 1066 is due by the 15th day of the
dollars, it must round all amounts. To round, drop amounts
3rd month following the date the REMIC ceased to exist.
under 50 cents and increase amounts from 50 to 99 cents
If you need more time to file Form 1066, file Form 7004, to the next dollar (for example, $1.39 becomes $1 and
Application for Automatic Extension of Time To File $2.50 becomes $3).
Certain Business Income Tax, Information, and Other
Returns, to request an automatic extension. You must file If two or more amounts must be added to figure the
Form 7004 by the regular due date of Form 1066. amount on a line, include cents when adding the amounts
and round off only the total.
Period Covered
File the 2023 return for: Recordkeeping
The REMIC’s records must be kept as long as their
1. Calendar year 2023;
contents may be material in the administration of any
2. Short tax years beginning and ending in 2023; or Internal Revenue law. Copies of the filed tax returns
3. Short tax years beginning and ending in 2024, if the should also be kept as part of the REMIC's records. See
2024 Form 1066 isn't available by the time the REMIC is Pub. 583, Starting a Business and Keeping Records, for
required to file its 2024 return. Even though the REMIC is more information.
filing the 2024 tax return on a 2023 Form 1066, any tax
law changes effective after December 31, 2023, have to Final Return
be applied on the tax return. If the REMIC ceases to exist during the year, check the
box on Form 1066, page 1, item D(1).
In the case of (2) or (3) above, fill in the dates for
! the short tax year at the top of the form. The box on Schedule Q (Form 1066), item E(1), should
CAUTION also be checked to indicate when the schedule is for the
final quarter of the year.

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Amended Return For more details, see the General Instructions for
Certain Information Returns.
If the REMIC files its return and later becomes aware of
changes it must make to income, deductions, or other Form 8275, Disclosure Statement; and Form 8275-R,
items, the REMIC should then file: Regulation Disclosure Statement. Use these forms to
• Form 1065-X, Amended Return or Administrative disclose items or positions taken on a tax return that aren't
Adjustment Request (AAR); and otherwise adequately disclosed on the return or that are
• An amended Schedule Q (Form 1066) for each residual contrary to Treasury regulations (to avoid parts of the
interest holder, and check the box on item E(2). Give accuracy-related penalty or certain preparer penalties).
corrected Schedules Q (Form 1066) to each residual Form 8300, Report of Cash Payments Over $10,000
interest holder. Received in a Trade or Business. Generally, this form is
If the REMIC's federal return is changed for any reason, used to report the receipt of more than $10,000 in cash or
it may affect its state return. This would include changes foreign currency in one transaction or a series of related
made as a result of an examination of the REMIC’s return transactions.
by the IRS. Contact the state tax agency where the state Form 8811, Information Return for Real Estate Mort-
return is filed for more information. gage Investment Conduits (REMICs) and Issuers of
Collateralized Debt Obligations. A REMIC uses this
Assembling the Return form to provide the information required by Regulations
If you need more space to report items shown on the section 1.6049-7(b)(1)(ii). This information will be
forms or schedules, attach separate sheets reporting the published in Pub. 938, Real Estate Mortgage Investment
items. Use the same size and format as on the printed Conduits (REMICs) Reporting Information. This
forms. But show the totals on the printed forms. Be sure to publication contains a directory of REMICs.
enter the REMIC's name and employer identification Pub. 938 isn't printed. Instead, it is available on the IRS
number (EIN) on each sheet. website. For more information about Pub. 938, go to
You must complete every applicable entry space on IRS.gov/Pub938.
Form 1066. If you attach statements, don’t enter “See Form 8822-B, Change of Address or Responsible
Attached” instead of completing the entry spaces on this Party—Business. This form is used to inform the IRS of
form. a new REMIC address if the change is made after filing
Form 1066.
Other Forms and Returns That May
Be Required Payment of Tax Due
The REMIC must pay the tax due (page 1, Section II,
Form 1096, Annual Summary and Transmittal of U.S. line 3) in full by the 15th day of the 3rd month following the
Information Returns. Use this form to summarize and end of the tax year.
send information returns to the IRS.
Electronic deposit requirement. REMICs must use
Form 1098, Mortgage Interest Statement. This form is electronic funds transfer (EFT) to make all federal tax
used to report the receipt from any individual of $600 or deposits (such as deposits of employment tax, excise tax,
more of mortgage interest and points in the course of the and income tax). Generally, an EFT is made using the
REMIC's trade or business. Electronic Federal Tax Payment System (EFTPS). If you
Forms 1099-A, B, C, INT, LTC, MISC, NEC, OID, R, S, don't want to use EFTPS, you can arrange for your tax
and SA. Use these information returns to report professional, financial institution, payroll service, or other
acquisitions or abandonments of secured property; trusted third party to make electronic deposits on your
proceeds from broker and barter exchange transactions; behalf.
cancellation of debt; interest income; certain payments To get more information about EFTPS or to enroll in
made under a long-term care insurance contract and EFTPS, go to EFTPS.gov or call 800-555-4477. Additional
certain accelerated death benefits; miscellaneous information about EFTPS is also available in Pub. 966.
information; nonemployee compensation; original issue
discount; distributions from pensions, annuities, Same-day wire payment option. If the REMIC fails to
retirement or profit-sharing plans, individual retirement submit a deposit transaction on EFTPS by 8 p.m. Eastern
arrangements (IRAs), insurance contracts, etc.; proceeds time the day before the date a deposit is due, it can still
from real estate transactions; and distributions from an make its deposit on time by using the Federal Tax
HSA, Archer MSA, or Medicare Advantage MSA. Also, Collection Service (FTCS) to make a same-day wire
use these returns to report amounts that were received as payment. To use the same-day wire payment method, the
a nominee on behalf of another person. REMIC will need to make arrangements with its financial
institution ahead of time. Please check with the financial
Generally, a REMIC must file Forms 1099-INT and institution regarding availability, deadlines, and costs.
1099-OID, as appropriate, to report accrued income of Financial institutions may charge a fee for payments made
$10 or more of regular interest holders. See Regulations this way. To learn more about the information required by a
section 1.6049-7. Also, every REMIC must file Forms financial institution to make a same-day wire payment, go
1099-MISC if it makes payments of rents, commissions, or to IRS.gov/SameDayWire.
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.

Instructions for Form 1066 (2023) -3-

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Interest and Penalties                                          and if the issue price of the residual interest is more than 
                                                                its adjusted basis, the excess is amortized and included in 
Interest. Interest is charged on taxes not paid by the due      the residual interest holder's income ratably over the 
date, even if an extension of time to file is granted. Interest anticipated weighted average life of the REMIC (as 
is also charged on penalties imposed for failure to file,       defined in Regulations section 1.860E-1(a)(3)(iv)).
negligence, fraud, substantial valuation misstatements,               If the transferor holds a regular interest and if the 
substantial understatements of tax, and reportable              adjusted basis of the regular interest is more than its issue 
transaction understatements from the due date (including        price, the regular interest holder treats the excess as 
extensions) to the date of payment. The interest charge is      amortizable bond premium subject to the rules of section 
figured at a rate determined under section 6621.                171. If the transferor holds a residual interest and if the 
Late filing penalty. A penalty may be charged if the            adjusted basis of the residual interest is more than its 
return is filed after the due date (including extensions) or    issue price, the excess is deductible ratably over the 
the return doesn't show all the information required, unless    anticipated weighted average life of the REMIC (as 
each failure is due to reasonable cause and not due to          defined in Regulations section 1.860E-1(a)(3)(iv)).
willful neglect.
                                                                Payments Subject to Withholding at 
If you receive a notice about a penalty after you file this 
return, reply to the notice with an explanation of why the      Source
return was late. We will determine if you meet the              If there are any nonresident alien individuals, foreign 
reasonable-cause criteria. Don't attach an explanation          partnerships, or foreign corporations as regular interest 
when you file your return.                                      holders or residual interest holders, and the REMIC has 
If taxes are due, we will charge a section 6651 penalty         items of gross income from sources within the United 
of 5% of the unpaid tax for each month or part of a month       States (see sections 861 through 865), see Form 1042, 
the return is late, up to a maximum of 25% of the unpaid        Annual Withholding Tax Return for U.S. Source Income of 
tax; or, if the return is 60 days or more late, $485 or the     Foreign Persons.
balance of the tax due on the return, whichever is smaller. 
If no tax is due, we may charge a section 6698 penalty of       Who Must Sign
$235 for each person who was a residual interest holder in      Startup day after November 9, 1988.       For a REMIC with 
the REMIC at any time during the year for each month or         a startup day after November 9, 1988, Form 1066 may be 
part of a month the return is late, for up to 12 months.        signed by any person who could sign the return of the 
Although we can charge both the section 6651 and                entity in the absence of the REMIC election. Thus, the 
section 6698 penalties when taxes are due, we will              return of a REMIC that is a corporation or trust would be 
generally charge only one of the penalties, whichever is        signed by a corporate officer or a trustee, respectively. For 
greater.                                                        REMICs with only segregated pools of assets, the return 
Late payment penalty.  The penalty for not paying the           would be signed by any person who could sign the return 
tax when due is usually  /  of 1% of the unpaid tax for 1 2     of the entity owning the assets of the REMIC under 
each month or part of a month the tax is unpaid. The            applicable state law.
penalty can't exceed 25% of the unpaid tax. The penalty         Paid preparer’s information. If someone is paid to 
won't be charged if you can show reasonable cause for           prepare the return, the preparer must sign the return and 
not paying on time.                                             complete the “Paid Preparer Use Only” area.
Other penalties. Penalties can also be imposed for                    The paid preparer must:
negligence, substantial understatements of tax, reportable          • Have a valid Preparer Tax Identification Number (PTIN),
transaction understatements, and fraud. See sections                • Complete the required preparer information,
6662, 6662A, and 6663.                                              • Sign the return in the space provided for the preparer's 
                                                                signature, and
Contributions to the REMIC                                          • Give the REMIC a copy of the return.
Generally, no gain or loss is recognized by the REMIC or 
any of the regular or residual interest holders when            Note. A paid preparer may sign original returns, amended 
property is transferred to the REMIC in exchange for an         returns, or requests for filing extensions by rubber stamp, 
interest in the REMIC. The adjusted basis of the interest       mechanical device, or computer software program.
received equals the adjusted basis of the property 
transferred to the REMIC.                                       Paid Preparer Authorization
                                                                If the REMIC wants to allow the IRS to discuss its 2023 tax 
The basis to the REMIC of property transferred by a             return with the paid preparer who signed it, check the 
regular or residual interest holder is its fair market value    "Yes" box in the signature area of the return. This 
immediately after its transfer.                                 authorization applies only to the individual whose 
If the transferor holds a regular interest and if the issue     signature appears in the "Paid Preparer Use Only" section 
price of the regular interest is more than its adjusted basis,  of the REMIC's return. It doesn't apply to the firm, if any, 
the excess is included in income by the regular interest        shown in that section.
holder for the applicable tax years as if the excess were             If the “Yes” box is checked, the REMIC is authorizing 
market discount on a bond and the holder had made an            the IRS to call the paid preparer to answer any questions 
election under section 1278(b) to include this market           that may arise during the processing of its return. The 
discount currently. If the transferor holds a residual interest REMIC is also authorizing the paid preparer to:

                                                                -4-                   Instructions for Form 1066 (2023)

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• Give the IRS any information that is missing from the          Item C—Total assets at end of tax year. Enter the total 
return;                                                          assets of the REMIC. If there are no assets at the end of 
• Call the IRS for information about the processing of the       the tax year, enter zero.
return or the status of any related refund or payment(s); 
and                                                              Section I
• Respond to certain IRS notices that the REMIC has 
                                                                 Income—(Lines 1 Through 6)
shared with the preparer about math errors, offsets, and 
return preparation.                                              Line 1—Taxable interest. Enter the total taxable 
  The REMIC isn't authorizing the paid preparer to               interest. Taxable interest is interest that is included in 
receive any refund check, bind the REMIC to anything             ordinary income from all sources except interest exempt 
(including any additional tax liability), or otherwise           from tax and interest on tax-free covenant bonds. You may 
represent the REMIC before the IRS.                              elect to reduce the amount of interest accrued on taxable 
                                                                 bonds by the amount of amortizable bond premium on 
  The authorization can't be revoked. However, the               those bonds attributable to the current tax year. See 
authorization will automatically end no later than the due       sections 171(c) and 171(e) for details.
date (excluding extensions) for filing the REMIC's 2024 
                                                                 Line 2—Accrued market discount under section 
tax return. If the REMIC wants to expand the paid 
                                                                 860C(b)(1)(B). Enter the amount of market discount 
preparer's authorization or revoke the authorization before 
                                                                 attributable to the current tax year determined on the basis 
it ends, see Pub. 947, Practice Before the IRS and Power 
                                                                 of a constant interest rate under the rules of section 
of Attorney.
                                                                 1276(b)(2).
                                                                 Line 4—Ordinary gain or (loss). Enter the net gain or 
Specific Instructions                                            (loss) from Form 4797, Sales of Business Property, Part II.
General Information                                              Line 5—Other income.     Attach a statement listing by 
                                                                 type and amount any other taxable income not reported 
Name, address, and EIN.     Enter the REMIC's legal name         on lines 1 through 4. If there is only one item of other 
and address on the appropriate lines. Include the suite,         income, describe it in parentheses to the left of the entry 
room, or other unit number after the street address. If the      space on line 5 instead of attaching a statement.
Post Office doesn't deliver mail to the street address and 
the REMIC has a P.O. box, show the box number instead.             If the REMIC issued regular interests at a premium, the 
If the REMIC receives its mail in care of a third party (such    net amount of the premium is income that must be 
as an accountant or attorney), enter on the street address       prorated over the term of these interests. Include this 
line “C/O” followed by the third party's name and street         income on line 5.
address or P.O. box. If the REMIC has changed its                  Generally, cancellation of REMIC debt (for example, 
address since it last filed a return (including a change to      cancellation of unpaid principal and accrued but unpaid 
an “in care of” address), check the box for item D(3),           interest owed to a REMIC regular interest holder) should 
Address change.                                                  be recognized as income and reported on line 5. Attach a 
                                                                 supporting statement to line 5 to separately disclose 
Note.   If a change in address or responsible party occurs       income from cancellation of REMIC debt.
after the return is filed, use Form 8822-B to notify the IRS       REMICs with a startup date before November 12, 1991, 
of the change.                                                   enter any capital gain or (loss) on line 5. The REMIC can 
  Enter the REMIC's EIN on Form 1066, page 1, item A. If         use the Schedule D, included in the 2011 Form 1066, or a 
the REMIC doesn't have its own EIN, it must apply for one.       statement showing the same information as it appears on 
A REMIC may apply for an EIN by one of the methods               the Schedule D, included in the 2011 Form 1066, to figure 
discussed below.                                                 the capital gain (loss). Attach the schedule or statement to 
• Online by going to IRS.gov/EIN. The EIN is issued              Form 1066.
immediately once the application information is validated.
• By mailing or faxing Form SS-4 to the IRS.                     Deductions—(Lines 7 Through 14)
If the REMIC hasn't received its EIN by the time the return 
is due, write “Applied for” in the space for the EIN. For        Include only deductible amounts on lines 7 through 14. A 
more details, see Pub. 583.                                      REMIC isn't allowed any of the following deductions in 
Item B—Date REMIC started.  Enter the “startup day”              computing its taxable income.
selected by the REMIC.                                           • The net operating loss deduction.
                                                                 • The deduction for taxes paid or accrued to foreign 
  The startup day is the day on which the REMIC issued 
                                                                 countries and U.S. possessions.
all of its regular and residual interests. However, a sponsor 
                                                                 • The deduction for charitable contributions.
may contribute property to a REMIC in exchange for 
                                                                 • The deduction for depletion under section 611 for oil 
regular and residual interests over any period of 10 
                                                                 and gas wells.
consecutive days, and the REMIC may designate any 1 of 
                                                                 • Losses or deductions allocable to prohibited 
those 10 days as the startup day. The day so designated 
                                                                 transactions.
is then the startup day, and all interests are treated as 
issued on that day.                                              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 

Instructions for Form 1066 (2023)                             -5-

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federal income tax purposes. Enter the amount of interest, to those interests, the administrative costs associated with
including original issue discount, accruing to regular servicing that class outweigh the benefits of maintaining
interest holders for the tax year. Don't deduct any amounts the class. It doesn't include the redemption of a class in
paid or accrued for residual interests in the REMIC. order to profit from a change in interest rates.
Line 10—Other interest. Don't include interest deducted Line 1a—Gain from certain dispositions of qualified
on line 9 or interest on indebtedness incurred or continued mortgages. Enter the amount of gain from the
to purchase or carry obligations on which the interest is disposition of any qualified mortgage transferred to the
wholly exempt from income tax. You may elect to include REMIC other than a disposition from:
amortization of bond premium on taxable bonds acquired • The substitution of a qualified replacement mortgage for
before 1988 unless you elected to offset amortizable bond a qualified mortgage or the repurchase in lieu of
premium against the interest accrued on the bond (see substitution of a defective obligation;
the Section I, line 1, instructions). Don't include any • The foreclosure, default, or imminent default of the
amount attributable to a tax-exempt bond. mortgage;
Line 11—Taxes. If you have to pay tax on net income • The bankruptcy or insolvency of the REMIC; or
from foreclosure property, you should include this tax • A qualified liquidation.
(from Schedule J, line 10) on line 11 of Form 1066. See section 860F(a) for details and exceptions.
Line 1b—Income from nonpermitted assets. Enter the
Note. See section 164(d) for apportionment of taxes on
amount of any income received or accrued during the year
real property between the seller and purchaser.
attributable to any asset other than a qualified mortgage
Enter taxes accrued during the tax year but don't or permitted investment. See section 860G(a) for
include the following. definitions.
• Federal income taxes (except the tax on net income
from foreclosure property). Line 1c—Compensation for services. Enter the receipt
• Foreign or U.S. possession income taxes. by the REMIC of any amount representing a fee or other
• Taxes not imposed on the REMIC. compensation for services.
• Taxes, including state or local sales taxes, that are paid Line 1d—Gain from the disposition of cash flow in-
or incurred in connection with an acquisition or disposition vestments (except from a qualified liquidation). Enter
of property. Such taxes must be treated as a part of the the amount of gain from the disposition of any cash flow
cost of the acquired property or, in the case of a investment except from a qualified liquidation. A cash flow
disposition, as a reduction in the amount realized on the investment is any investment of amounts received under
disposition. qualified mortgages for a temporary period (not more than
Line 12—Depreciation. See the Instructions for Form 13 months) before distribution to holders of interests in the
4562, Depreciation and Amortization, or Pub. 946, How To REMIC. See section 860F(a)(4) for the definition of a
Depreciate Property, to figure the amount of depreciation qualified liquidation.
to enter on this line. You must complete and attach Form
Part II—Tax on Net Income From Foreclosure
4562 if the REMIC placed property in service during 2023,
claims a section 179 expense deduction, or claims Property
depreciation on any car or other listed property. For a definition of foreclosure property, see the
instructions for Schedule L, line 1c, later. Net income from
Line 13—Other deductions. Attach a statement listing foreclosure property must also be included in the
by type and amount any other allowable deductions (such computation of taxable income (or net loss) shown on
as bad debt deductions) for which no line is provided on Form 1066, page 1, Section I.
Form 1066. If there is only one item of other deductions,
describe it in parentheses to the left of the entry on line 13 Line 6—Gross income from foreclosure property.
instead of attaching a statement. Don't include on line 6 amounts described in section
856(c)(3)(A), (B), (C), (D), (E), or (G).
Schedule J
Line 8—Deductions. Only those expenses that are
Part I—Tax on Net Income From Prohibited directly connected with the production of the income
shown on line 7 may be deducted to figure net income
Transactions from foreclosure property. Allowable deductions include
Losses not included. Don't net losses from prohibited depreciation on foreclosure property, interest accrued on
transactions against income or gains from prohibited debt of the REMIC attributable to the carrying of
transactions in determining the amounts to enter on lines foreclosure property, real estate taxes, and fees charged
1a through 1d. These losses aren't deductible in by an independent contractor to manage foreclosure
computing net income from prohibited transactions. property. Don't deduct general overhead and
For purposes of lines 1a and 1d, the term “prohibited administrative expenses.
transactions” doesn't include any disposition that is Line 10—Tax on net income from foreclosure proper-
required to prevent default on a regular interest where the ty. The REMIC is allowed a deduction for the amount of
threatened default resulted from a default on one or more tax shown on this line. Include this amount in computing
qualified mortgages, or to facilitate a clean-up call. A the deduction for taxes entered on Form 1066, page 1,
clean-up call is the redemption of a class of regular Section I, line 11.
interests when, by reason of prior payments with respect

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Part III—Tax on Contributions After the Startup Item H—Foreign financial accounts. Check the “Yes”
Day box if either (1) or (2) below applies to the REMIC.
Don't complete this part if the startup day was before July Otherwise, check the “No” box.
1, 1987. For this purpose, startup day means any day 1. At any time during the 2023 calendar year, the
selected by a REMIC that is on or before the first day on REMIC had a financial interest in or signature or other
which interests in the REMIC are issued. authority over any foreign financial account, including
Line 11—Tax. Enter the amount of contributions received bank, securities, or other types of financial accounts in a
during the calendar year after the startup day (as defined foreign country (see FinCEN Form 114, Report of Foreign
in the prior paragraph). See section 860G(d). Don't Bank and Financial Accounts (FBAR)); and
include cash contributions described next. a. The combined value of the accounts was more than
• Any contribution to facilitate a clean-up call or a $10,000 at any time during the calendar year, and
qualified liquidation. b. The account wasn't with a U.S. military banking
• Any payment in the nature of a guarantee. facility operated by a U.S. financial institution.
• Any contribution during the 3-month period beginning 2. The REMIC owns more than 50% of the stock in any
on the startup day. corporation that would answer “Yes” to item 1 above.
• Any contribution to a qualified reserve fund by any
holder of a residual interest in the REMIC. If the “Yes” box is checked, do the following.
Attach a statement showing your computation. • Enter the name of the foreign country or countries
where the foreign account(s) is held in the space provided
Additional Information on the form. Attach a separate sheet if more space is
Be sure to answer the questions and provide other needed.
information in items E through L. • Electronically file FinCEN Form 114, also referred to as
FBAR, with the Department of the Treasury using the
Item E—Type of entity. Check the box for the entity type FinCEN's BSA E-Filing System. Because FinCEN Form
of the REMIC recognized under state or local law. If the 114 isn't a tax form, don't file it with Form 1066.
REMIC isn't a separate entity under state or local law,
check the box for “Segregated Pool of Assets” and state Go to FinCEN.gov for more information.
the name and type of entity that owns the assets in the Item I—Foreign trust. The REMIC may be required to
spaces provided. file Form 3520, Annual Return To Report Transactions
Item F—Number of residual interest holders. Enter With Foreign Trusts and Receipt of Certain Foreign Gifts,
the number of persons who were residual interest holders if:
at any time during the tax year. • It directly or indirectly transferred money or property to a
foreign trust (for this purpose, any U.S. person who
Item G—Electing out of the centralized partnership created a foreign trust is considered a transferor);
audit regime. A REMIC with only one residual interest • It is treated as the owner of any part of the assets of a
holder at all times during the tax year doesn't need to foreign trust under the grantor trust rules; or
complete item G because the REMIC isn't subject to the • It received a distribution from a foreign trust.
centralized partnership audit regime. If the REMIC had
For more information, see the Instructions for Form
more than one residual interest holder at any time during
3520.
the tax year, it may be eligible to elect out of the
centralized partnership audit regime for the tax year if it Note. An owner of a foreign trust must ensure that the
has 100 or fewer residual interest holders in that year, trust files an annual information return on Form 3520-A,
each of which is either an individual, a C corporation, a Annual Information Return of Foreign Trust With a U.S.
foreign entity that would be treated as a C corporation if it Owner. For details, see the Instructions for Form 3520-A.
was domestic, an S corporation, or an estate of a
deceased residual interest holder. The election is made by To report information required under section 6038B, the
checking the box on item G of a timely filed Form 1066. If REMIC may be required to file Form 926, Return by a U.S.
the REMIC makes this election, it must also attach Transferor of Property to a Foreign Corporation; or Form
Schedule B-2 (Form 1065) to Form 1066 and provide all of 8865, Return of U.S. Persons With Respect to Certain
the information requested on the Schedule B-2 for each Foreign Partnerships. See the instructions for these forms
residual interest holder and the shareholders of any S for more information.
corporation residual interest holders. The REMIC must Item L—Sum of the daily accruals. Enter the total of
notify each residual interest holder of the election within the daily accruals for all residual interests for the calendar
30 days of making the election. year. See section 860E(c)(2) for details.
If the REMIC had more than one residual interest
holder at any time during the tax year and didn't elect out Schedule L, Balance Sheets per
of the centralized partnership audit regime, it must Books
complete the Designation of Partnership Representative The amounts shown should agree with the REMIC's
on page 4 of Form 1066. For more information, see books and records. Attach a statement explaining any
Designation of Partnership Representative, later. differences.
Line 1a—Cash flow investments. These are any
investments of amounts received under qualified

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mortgages for a temporary period (not more than 13 The amounts shown should agree with the REMIC's
months) before distribution to holders of interests in the books and records and the balance sheet amounts.
REMIC. Attach a statement explaining any differences.
Line 1b—Qualified reserve assets. The term “qualified Include in column (d):
reserve asset” means any intangible property that is held • Tax-exempt interest income,
for investment and as part of a qualified reserve fund. For • Other tax-exempt income,
a definition of qualified reserve fund, including exceptions, • Income from prohibited transactions,
see sections 860G(a)(7)(B) and (C). • Income recorded on the REMIC's books but not
Line 1c—Foreclosure property. This is any real included on this return, and
property (including interests in real property), and any • Allowable deductions not charged against book income
personal property incident to such real property, acquired this year.
by the REMIC as a result of the REMIC's having bid in the Include in column (e):
property at foreclosure, or having otherwise reduced the • Capital losses over the $3,000 limitation (for a REMIC
property to ownership or possession by agreement or with a startup day before November 12, 1991),
process of law, after there was a default or imminent • Other nondeductible amounts (such as losses from
default on a qualified mortgage held by the REMIC. prohibited transactions and expenses connected with the
Generally, this property ceases to be foreclosure property production of tax-exempt income),
at the close of the third tax year following the tax year in • Deductions allocable to prohibited transactions,
which the REMIC acquired the property. See sections • Expenses recorded on books not deducted on this
860G(a)(8) and 856(e), and Regulations section 1.856-6 return, and
for more details. • Taxable income not recorded on the books this year.

Note. Solely for purposes of section 860D(a), the Designation of Partnership
determination of whether any property is foreclosure
property will be made without regard to section 856(e)(4). Representative (PR)
Unless the REMIC has made a valid election out of the
Line 7—regular interests. These are interests in the centralized partnership audit regime or had only one
REMIC that are issued on the startup day with fixed terms residual interest holder at all times during the tax year, the
and that are designated as regular interests, if: REMIC must designate a PR. The PR can be any person
1. Such interest unconditionally entitles the holder to with a substantial presence in the United States. The PR
receive a specified principal amount or other similar will have the sole authority to act on behalf of the REMIC.
amounts; and If an entity is designated as PR, the REMIC must also
2. Interest payments (or similar amounts), if any, with appoint an individual to act on the entity's behalf (a
respect to the interest at or before maturity are payable designated individual (DI)). The DI must also have a
based on a fixed rate (or at a variable rate described in substantial presence in the United States.
Regulations section 1.860G-1(a)(3)), or consist of a How to designate. An original designation of a PR must
specified portion of the interest payments on qualified be made on the REMIC's Form 1066 filed for each
mortgages and this portion doesn't vary during the period respective REMIC tax year.
that the interest is outstanding.
PR authority. The REMIC and all its residual interest
The interest will meet the requirements of (1) even if the holders (and any other person whose tax liability is
timing (but not the amount) of the principal payments (or determined in whole or in part by taking into account
other similar amounts) is contingent on the extent of directly or indirectly adjustments determined under the
prepayments on qualified mortgages and the amount of centralized partnership audit regime) are bound by the
income from permitted investments. actions of the PR in dealings with the IRS. A designation
An interest will still qualify as a regular interest even if for a partnership tax year remains in effect until the
the specified principal amount of the regular interest (or designation is terminated by:
the amount of interest accrued on the regular interest) can • Valid resignation of the PR,
be reduced as a result of the nonoccurrence of one or • Valid revocation of the PR, or
more contingent payments with respect to any reverse • Determination by the IRS that the designation isn’t in
mortgage loan held by the REMIC if, on the startup day for effect.
the REMIC, the sponsor reasonably believes that all Substantial presence. In order for either a PR or a DI to
principal and interest due under the regular interest will be have substantial presence in the United States, they must:
paid at or prior to the liquidation of the REMIC. Make themselves available to meet in person with the
•
Schedule M, Reconciliation of IRS in the United States at a reasonable time and place,
as determined by the IRS;
Residual Interest Holders’ Capital • Have a street address that is in the United States;
Accounts • Have a telephone number with a U.S. area code; and
• Have a U.S. taxpayer identification number.
Show what caused the changes in the residual interest
holders' capital accounts during the tax year.

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Schedule Q, Quarterly Notice to Item B—Residual Interest Holder's Percentage of
Ownership
Residual Interest Holder of REMIC
Taxable Income or Net Loss Enter in item B2 the percentage at the end of the calendar
quarter. However, if a residual interest holder's percentage
Allocation of ownership changed during the quarter, enter in item B1
the percentage immediately before the change. If there
Purpose of Schedule are multiple changes in the percentage of ownership
Schedule Q (Form 1066) shows each residual interest during the quarter, attach a statement giving the date and
holder's share of the REMIC's quarterly taxable income percentage before each change.
(or net loss), the excess inclusion for the residual interest
holder's interest, and the residual interest holder's share Item C—REMIC Assets
of the REMIC's section 212 expenses for the quarter.
Although the REMIC isn't subject to income tax (except Enter in item C the percentage of the REMIC's assets
on net income from prohibited transactions, net income during the calendar quarter represented by each of the
from foreclosure property, and contributions made after following categories of assets.
the startup day), the residual interest holders are liable for • Real estate assets under section 856(c)(5)(B).
tax on their shares of the REMIC's taxable income, • Assets described in section 7701(a)(19)(C) (relating to
whether or not distributed, and must include their shares the definition of a domestic building and loan association).
on their tax returns.
These percentages must be computed using the
Note. Schedule Q (Form 1066) is a separate tax form that average adjusted basis of the assets held during the
isn't part of Form 1066. calendar quarter. To do this, the REMIC must make the
appropriate computation as of the close of each month,
General Instructions week, or day and then average the monthly, weekly, or
For each calendar quarter, complete Schedule Q (Form daily percentages for the quarter. The monthly, weekly, or
1066) for each person who was a residual interest holder daily computation period must be applied uniformly during
at any time during the quarter. File Schedule Q with Form the calendar quarter to both categories of assets, and may
1066. Give one copy to the residual interest holder by the not be changed in succeeding calendar quarters without
last day of the month following the month in which the IRS consent. If the percentage of the REMIC's assets for
calendar quarter ends. Keep one copy with a copy of either category is at least 95%, the REMIC may show “95
Form 1066 as part of the REMIC's records. or more” for that category in item C.

Specific Instructions If less than 95% of the assets of the REMIC are real
On each Schedule Q, enter the name, address, and estate assets (as defined in section 856(c)(5)(B)), the
identifying number for each residual interest holder and REMIC must also report to any real estate investment trust
REMIC. For each residual interest holder that is an that holds a residual interest the information specified in
individual, you must enter the residual interest holder's Regulations section 1.860F-4(e)(1)(ii)(B). However, if a
social security number (SSN) (or individual taxpayer REMIC is an “eligible REMIC,” as defined in Notice
identification number (ITIN) for a resident or nonresident 2012-5, and a percentage of its assets represented by
alien). For all other residual interest holders, you must either of the categories of assets described under REMIC
enter the residual interest holder's EIN. However, if a assets, earlier, was less than 95% but at least 80%, then
residual interest holder is an IRA, enter the identifying the REMIC need only specify in item C that the
number of the IRA trust. Don't enter the SSN (or ITIN) of percentage for that category was at least 80%. For more
the individual for whom the IRA is maintained. information, see Notice 2012-5, available on page 291 of
Internal Revenue Bulletin 2012-3 at IRS.gov/irb/
Item A—What Type of Entity Is This Residual 2012-03_IRB#NOT-2012-5.
Interest Holder?
Item F—Reconciliation of Residual Interest
State on this line whether the residual interest holder is an Holder's Capital Account
individual, a corporation, an estate, a trust, a partnership,
an exempt organization, a nominee (custodian), or See the instructions for Schedule M, earlier.
another REMIC. If the residual interest holder is a
nominee, use the following codes to indicate in Line 1a—Taxable income (net loss) of the REMIC for
parentheses the type of entity the nominee represents. the calendar quarter. Enter the REMIC's taxable
• I—Individual. income (net loss) for the calendar quarter. The sum of the
• C—Corporation. totals for the four quarters in the calendar year must equal
• F—Estate or Trust. the amount shown on Form 1066, Section I, line 15.
• P—Partnership. Line 1b—Your share of the taxable income (net loss)
• E—Exempt Organization. for the calendar quarter. Enter the residual interest
• R—REMIC. holder's share of the taxable income (net loss) shown on
• IRA—Individual Retirement Arrangement. line 1a (determined by adding the holder's daily portions
under section 860C(a)(2) for each day in the quarter the

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holder held the residual interest). If line 1a is a loss, enter • Litigation expenses, and
the residual interest holder's full share of the loss, without • The cost of preparing and distributing reports and
regard to the adjusted basis of the residual interest notices to interest holders.
holder's interest in the REMIC.
Line 3b—Your share of section 212 expenses for the
Line 2a—Sum of the daily accruals under section calendar quarter. Enter the residual interest holder's
860E for all residual interests for the calendar quar- share of the amount shown on line 3a.
ter. Enter the product of the sum of the adjusted issue
prices of all residual interests at the beginning of the Paperwork Reduction Act Notice. We ask for the
quarter and 120% of the long-term federal rate information on this form to carry out the Internal Revenue
(determined on the basis of compounding at the end of laws of the United States. You're required to give us the
each quarter and properly adjusted for the length of such information. We need it to ensure that you are complying
quarter). See section 860E(c) for details. with these laws and to allow us to figure and collect the
right amount of tax.
Line 2b—Sum of the daily accruals under section
860E for your interest. Enter zero if line 2a is zero. You’re not required to provide the information requested
Otherwise, divide the amount shown on line 2a by the on a form that is subject to the Paperwork Reduction Act
number of days in the quarter. Multiply the result by the unless the form displays a valid OMB control number.
residual interest holder's percentage of ownership for Books or records relating to a form or its instructions must
each day in the quarter that the residual interest holder be retained as long as their contents may become
owned the interest. Total the daily amounts and enter the material in the administration of any Internal Revenue law.
result. Generally, tax returns and return information are
confidential, as required by section 6103.
Line 3. Complete lines 3a and 3b only for residual
interest holders who are individuals or other pass-through The time needed to complete and file this form and
interest holders (as defined in Temporary Regulations related schedule will vary depending on individual
section 1.67-3T). circumstances. The estimated burden for business
Line 3a—Section 212 expenses of the REMIC for the taxpayers filing this form and the related schedule is
calendar quarter. Enter the REMIC's allocable section approved under OMB control number 1545-0123 and is
212 expenses for the calendar quarter. The term included in the estimates shown in the instructions for their
“allocable section 212 expenses” means the aggregate business income tax return.
amount of the expenses paid or accrued in the calendar If you have comments concerning the accuracy of the
quarter for which a deduction is allowable under section time estimates or suggestions for making this form and
212 in determining the taxable income of the REMIC for related schedule simpler, we would be happy to hear from
the calendar quarter. you. You can send us comments through IRS.gov/
Section 212 expenses generally include operational FormComments. Or, you can write to Internal Revenue
expenses such as: Service, Tax Forms and Publications, 1111 Constitution
• Rent, Ave. NW, IR-6526, Washington, DC 20224. Don’t send
• Salaries, tax questions, tax returns, or payments to the above
• Legal fees, address. Instead, see Where To File, earlier.
• Accounting fees,

-10- Instructions for Form 1066 (2023)

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