STATE OF HAWAII—DEPARTMENT OF TAXATION

2023 

Instructions for Form N-66
(Rev. 2023)

Real Estate Mortgage Investment  
Conduit Income Tax Return

(Section references are to the Internal Revenue Code unless otherwise noted.)
                                                        the first tax year of its existence, a Form N-66     tension. This extension does not include an ex-
General Instructions                                    signed by an authorized person. Once the elec-       tension of time to pay. File Form N-201V, Busi-
Purpose of Form.—Form N-66 is used to re-               tion is made, it stays in effect for all years until ness Income Tax Payment Voucher, to make a 
port the income, deductions, and gains and              it is terminated.                                    payment (if applicable). File Form N-201V  by 
losses from the operation of a real estate mort-        First Tax Year.—For the first year of a REMIC’s      the regular due date of the return.
gage investment conduit (REMIC).                        existence, the REMIC must furnish in a sepa-            Federal Form 7004, Application for Automat-
Website:                                                rate statement attached to the REMIC’s initial       ic Extension  of  Time to File  Certain Business 
tax.hawaii.gov                                          return the following:                                Income  Tax,  Information,  and  Other  Returns, 
Where to Get Forms and Tax Information.—                (1) information concerning the terms of the reg-     may not be used in lieu of Form N-201V. Form 
Hawaii  tax forms, instructions, and  schedules         ular interests and the designated  residual          N-201V may be filed and payment made elec-
may be obtained at any taxation district office or      interest of the REMIC, or a copy of the of-          tronically through the State’s Internet portal. For 
from the Department of Taxation’s (Department)          fering circular or prospectus containing such        more information, go to hitax.hawaii.gov.
website or you may contact a customer service           information, and                                     Period Covered.—File the 2023 return for:
representative at:                                      (2) a description  of the prepayment  and rein-      1.  Calendar year 2023,
Telephone: 808-587-4242                                 vestment assumptions made in accordance              2. Short tax years beginning  and ending in 
Toll-Free: 1-800-222-3229                               with section 1272(a)(6) and the regulations             2023, or
For the hearing impaired:                               thereunder,  including  documentation  sup-
   808-587-1418                                         porting the selection of the prepayment as-          3. Short tax years beginning  and ending in 
   Toll-Free: 1-800-887-8974                            sumption.                                               2024, if the 2024 Form N-66 is not available 
                                                                                                                by the time the REMIC is required to file its 
Who Must File.—An entity that elects to be              Termination of Election.—If any entity ceases           return. However, the REMIC must show its 
treated  as  a  REMIC  for  its  first  tax  year  (and to be a REMIC at any time during the tax year,          2024 tax year on the 2023 Form N-66 and 
for which the election is still in effect) and that     the election to be a REMIC terminates for such          incorporate any tax law changes that are ef-
meets the requirements  of section  860D(a)             year and all succeeding years. An entity is con-        fective for tax years beginning after Decem-
must file Form N-66.                                    sidered to cease being a REMIC when it no lon-          ber 31, 2023.
A REMIC is any entity—                                  ger meets the requirements of section 860D(a). 
                                                        For the tax year the entity ceased to qualify as a      Note: In the case of  2or  3 above, fill in 
(a) to which an election to be treated as a             REMIC and for all future years, you must file the       the tax year space at the top of the form.
    REMIC  applies for  the  tax  year and all          tax form for similarly organized entities (corpo-    Where to File.—File Form N-66 with the Hawaii 
    prior tax years,                                    rations, partnerships, trusts, etc.).                Department of Taxation, P.O. Box 3559, Hono-
(b) where  all of the interests are regular             When to File. —A REMIC must file Form N-66           lulu, Hawaii 96811-3559.
    interests or residual interests,                    by the 20th day of the fourth month following the    Accounting Method.—A REMIC must compute 
(c) that has one (and only one) class of                close of its tax year.                               its taxable income (or net loss) using the accrual 
    residual  interests (and all distributions,         However, if 2023 is the entity’s final return,       method of accounting. See section 860C(b).
    if any, with respect to such interests are          Form N-66 is due by the 20th day of the fourth          Under the accrual method, an amount is in-
    pro rata),                                          month following the date the REMIC ceased to         cludible in income when:
(d) where as of the close of the 3rd month              exist.
    beginning after the startup day and at all          The  official  U.S.  Post  Office  cancellation      •  All the events have occurred that fix the right 
                                                                                                                to receive the income, which is the earliest of 
    times thereafter, substantially  all  of the        mark will be considered primary evidence of the         the date: (a) the required performance takes 
    assets  consist  of  qualified  mortgages           date of filing of tax documents and payments.           place, (b) payment is due, or (c) payment is 
    and permitted investments,
                                                        Hawaii  has adopted the Internal Revenue                received and
(e) that has a tax year that is a calendar              Code  provision  to allow  documents and  pay-          The amount can be determined with reason-
    year, and                                           ments delivered by a designated private delivery     •
                                                                                                                able accuracy.
(f) if the entity has a startup day after March         service to qualify for the “timely mailing treated 
    31, 1988 (unless the entity is formed               as timely filing/paying rule.” The Department will      See Treasury Regulation section 1.451-1(a) 
    under a binding written contract in effect          conform to the Internal Revenue Service listing      for details.
    on that date), with respect to which there          of designated private delivery service and type         Generally,  an accrual basis taxpayer can 
    are reasonable  arrangements  designed              of delivery services qualifying under this provi-    deduct accrued expenses in the tax year when:
    to ensure that: (i) residual interests are          sion. Timely filing of mail which does not bear         All events  that  determine the  liability have 
    not held by disqualified organizations (as          the  U.S.  Post  Office  cancellation  mark  or  the •
                                                                                                                occurred,
    defined  in  section  860E(e)(5)),  and  (ii)       date recorded or marked by the designated de-
    information necessary for the application           livery service will be determined by reference to    •  The  amount  of  the  liability  can  be  figured 
    of section 860E(e) will be made available           other competent evidence. The private delivery          with reasonable accuracy, and
    by the entity.                                      service can tell you how to get written proof of     •  Economic performance takes place with re-
See section 860G for definitions and special            the mailing date.                                       spect to the expense.
rules. See section 860D(a) for qualification as a       Six month automatic extension of time to                There are exceptions to the economic per-
REMIC during a qualified liquidation.                   file. Section 18-235-98,  Hawaii Administrative      formance rule for  certain items, including re-
Making  the  Election.—The  election to  be             Rules, allows an automatic extension of time to      curring expenses. See section 461(h) and the 
treated as a REMIC is made by timely filing, for        file a return without filing an application for ex-

related regulations for the rules for determining  ment  or  profit-sharing  plans,  individual  retire- REMIC with a startup day before November 
when economic performance takes place.             ment arrangements  (IRAs),  insurance  con-           10, 1988.—A REMIC with a startup day before 
Rounding Off to Whole Dollars.—The Depart-         tracts,  etc.  Also,  use these returns  to  report   November  10, 1988, may elect to apply  the 
ment is requiring taxpayers to round off cents     amounts that were received as a nominee on            rules for REMICs with a startup day after No-
to the nearest whole dollar for all dollar entries behalf of another person.                             vember 9, 1988. Otherwise, Form N-66 must be 
on the tax return and schedules. To do so, drop    Note:  A REMIC must file federal Forms                signed by a residual interest holder or by a fidu-
amounts under 50 cents and increase amounts        1099-INT and 1099-OID, as appropriate,                ciary who is acting for the REMIC and who has 
from 50 to 99 cents to the next dollar. For ex-    to report accrued income of $10 or more               furnished adequate notice.
ample:  $1.39 becomes $1 and $2.69 becomes         of regular interest holders (including cor-            Note:   For this purpose, the term “start-
$3. If you have to add two or more amounts to      porate regular interest holders). Also, ev-            up  day”  means  any  day  selected  by  a 
figure the amount to enter on a line, schedule,    ery REMIC must file information returns                REMIC that is on or before the first day 
or worksheet, you may choose to use one of two     if, in the course of its trade or business             on which interests in such REMIC are is-
methods. Once a method of rounding is estab-       during the calendar year, it makes pay-                sued. Otherwise, “startup day” is defined 
lished, you must use the same method through-      ments  of  rents,  commissions,  or  other             in the instructions for Item B below.
out the return. The first method is to include the fixed  or  determinable  income  totaling             Paid Preparer’s Information.—If someone 
cents when adding and round off only the total.    $600 or more to any one person.                       prepares  the return and  does  not charge  the 
The other method is to round off each entry. For   Assembling the Return.—If you need  more              REMIC, that person should not sign the REMIC 
example: You received two 1099-INT forms, one      space on the forms or schedules, attach sepa-         return.
showing interest of $50.55 and one showing in-     rate sheets. Use the same arrangement as the           Generally, anyone who is paid to prepare the 
terest of $185.73. For rounding method 1, show     printed forms, and show  the totals on  the           REMIC return must sign the return and fill in the 
your total interest as $236 ($50.55 + $185.73 =    printed  forms.  Be sure to  put  the REMIC’s         other blanks in the Paid Preparer’s Use Only 
$236.28 rounded to $236). For rounding meth-       name and federal employer identification num-         area of the return. The preparer may furnish his 
od 2, show your total interest as $237 ($50.55     ber on each sheet. Also, each separate sheet          or her alternative identifying number for income 
rounded to $51 + $185.73 rounded to $186 =         should clearly indicate the line or section on the    tax return preparers (PTIN) instead of his or her 
$51 + $186 = $237).                                printed form to which the information relates.        social security number.
Recordkeeping.—The REMIC records must              Please  complete  every  applicable  entry             The preparer required to sign the REMIC’s 
be kept as long as their contents may be mate-     space on Form N-66. Do not attach statements          return must complete the required preparer in-
rial in the administration of any Hawaii Income    and write “See Attached” in lieu of completing        formation and:
Tax Law. Copies of the filed tax returns should    the entry space on this form.
also be kept as part of the REMIC’s records.                                                             •  Sign in the space provided for the preparer’s 
See federal Pub. 583, Starting a Business and      Contributions  to  the  REMIC.—Generally,  no          signature.
Keeping Records, for more information.             gain  or  loss  is  recognized  by  the  REMIC  or 
                                                   any of the regular or residual  interest holders      •  Give the REMIC a copy of the return in ad-
Final  Return.—If the REMIC ceases to exist        when  property is transferred  to the REMIC in         dition to the copy to be filed with the Depart-
during  the year, check the box at Item D(1),      exchange for an interest in the REMIC. The ad-         ment.
page 1, Form N-66.                                 justed basis of the interest received equals the       The REMIC may authorize the Department 
  Schedule  Q (Form N-66),  Quarterly Notice       adjusted basis of the property transferred to the     to discuss its tax  return with its paid preparer 
to Residual Interest Holder of REMIC Taxable       REMIC.                                                by checking the “Yes” box above the paid pre-
Income or Net Loss Allocation, Box D(1) should     The basis to the REMIC of property trans-             parer’s identification number. You are authoriz-
be checked to indicate when the schedule is for    ferred by a regular or residual interest holder is    ing the Department to call your paid preparer 
the final quarter of the year.                     its fair market value immediately after its trans-    to answer any questions that may arise during 
Amended Return.—If after the REMIC files its       fer.                                                  the processing of your tax return. This does not 
                                                                                                         allow your paid preparer to call the Department 
return, and later becomes aware of any changes     If the transferor holds a regular interest and        for information about the processing of your re-
to income, deductions, etc., the REMIC should      if the issue price of the regular interest exceeds    turn or for other issues relating to your return. 
file an amended:                                   its adjusted basis, the excess is included in in-
•  Form N-66 and check the box at Item D(3),       come by the regular interest holder as accrued         Note: This is not a full power of attorney 
  page 1 and complete and attach Schedule          market discount for the tax years to which it is       and does not replace Form N-848.
  AMD, Explanation of Changes on Amended           attributable under the rules of section 1278(b). 
  Return, to the amended Form N-66.                If the transferor holds a residual interest and if    Specific Instructions
•  Schedule Q (Form N-66), for each residual       the issue price of a regular interest exceeds its 
  interest holder, and check the box at Item       adjusted basis, the excess is amortized and in-       Form N-66
  D(2). Give corrected Schedules  Q (Form          cluded in the residual interest holder’s income       Name, Mailing  Address, and  Federal Em-
  N-66) to each residual interest holder.          ratably over the anticipated  weighted  average       ployer  Identification  Number.—Print  or  type 
                                                   life of the REMIC (as defined in Treasury Regu-       the REMIC’s legal name and mailing address 
  Note: If  a  REMIC  does  not  meet  the         lation section 1.860E-1(a)(3)(iv)).                   on the appropriate lines.
  small  REMIC  exception  under  sections 
  860F(e), 6231, and the Treasury Regu-            If the transferor holds a regular interest and if      If  the REMIC’s mailing address is outside 
  lation thereunder, or if a REMIC makes           the adjusted basis of a regular interest exceeds      the United States or its possessions or territo-
  the election described in section 6231(a)        its issue price, the regular interest holder treats   ries, enter the information on the line for “City 
  (1)(B)(ii)  not  to  be  treated  as  a  small   the excess as amortizable bond premium sub-           or town, state, and postal/ZIP code” in the fol-
  REMIC, the amended return will be a re-          ject to the rules of section 171. If the transferor   lowing order: city, province or state, postal code, 
  quest for administrative adjustment, and         holds a regular interest and if the adjusted basis    and the name of the country. Do not abbreviate 
  federal  Form  1065X,  Amended  Return           of a regular interest exceeds its issue price, the    the country name.
  or  Administrative  Adjustment  Request          excess is deductible ratably over the weighted 
  (AAR), must be filed by the Tax Matters          average life of the REMIC (as defined in Trea-         If your mailing  address  has changed,  you 
  Person. See sections 860F(e) and 6227            sury Regulation section 1.860E-1(a)(3)(iv)).          must notify the Department of the change by 
                                                                                                         completing  Form  ITPS-COA,  Change  of  Ad-
  for more information.                            Signatures                                            dress Form, or log in to your Hawaii Tax Online 
                                                                                                         account at  hitax.hawaii.gov. Failure to do so 
Information Returns That May Be                    REMIC with a startup day after November 9,            may prevent your address from being updated, 
Required                                           1988.—For a REMIC with a startup day after            any refund due to you from being delivered (the 
                                                   November 9, 1988, Form N-66 may be signed             U.S. Postal Service is not permitted to forward 
Form N-196, Annual Summary and Transmittal         by any person who could sign the return of the        your State refund check), and delay important 
of Hawaii Information Returns. Use this form to    entity in the absence of  the REMIC election.         notices or correspondence  to you regarding 
summarize and send information returns to the      Thus, the return of a REMIC which is a corpora-       your return.
Department.                                        tion or trust would be signed by a corporate of-
Federal Forms 1099-INT, MISC, OID, and             ficer or trustee, respectively. For REMICs which       Note:   Each  REMIC  must  have  its  own 
R.  You may have to file these information re-     consist of segregated pools  of assets, the re-        federal employer identification number.
turns to report interest income, miscellaneous     turns would be signed by any person who could          Enter  the  federal  employer  identification 
income payments,  original issue discount and      sign the return of the entity which owns assets       number (FEIN)  in Item A on page 1 of Form 
distributions  from pensions,  annuities,  retire- of the REMIC under applicable State law.              N-66. If  the REMIC does not have a FEIN,  it 
Page 2

must apply for one by filing federal Form SS-4,      not deduct any amounts paid or accrued with        and type of entity which owns the assets in the 
Application for Employer Identification Number.      respect to residual interests in the REMIC.        spaces provided.
If the FEIN has not been received by the filing      Line 10. Other Interest.—Do not include inter-     Item G. Number of Residual Holders.—Enter 
time for Form N-66, write “Applied For” in the       est deducted on line 9 or interest on indebted-    the number of persons who were residual hold-
space  for  the  FEIN.  See  federal  Pub.  583  for ness incurred or continued to purchase or carry    ers at any time during the tax year.
more information.                                    obligations  on which the interest is wholly  ex-  Item J. Sum of the Daily Accruals.—Enter the 
Item B.  Date REMIC Started.—Enter the               empt from income tax. You may elect to include     sum of the daily accruals for all residual inter-
“startup day” selected by the REMIC as defined       amortization of bond premium on taxable bonds      ests for the calendar year. See section 860E(c)
in section 860G(a)(9).                               acquired before 1988 unless you elected to off-    (2) for details.
The startup day is the day on which the              set  amortizable  bond  premium  against  the  in-
REMIC issued all  of  its  regular and residual      terest accrued on the bond (see the Section I, 
interests. However, a sponsor  may contribute        line 1, instructions). Do not include any amount   Schedule L
property to a REMIC in exchange  for regular         attributable to a tax-exempt bond.
and  residual  interests over any period  of 10      Line 11.  Taxes.—Enter taxes paid or accrued       Balance Sheets per Books
consecutive  days and  the REMIC may desig-          during the tax year, but do not include the fol-   The  amounts  shown should agree  with the 
nate any one of those 10 days as the startup         lowing:                                            REMIC’s books and records. Attach a statement 
day. The day so designated is then the startup       1.  Federal income taxes (except the tax on net    explaining any differences.
day, and all interests are treated as issued on      income from foreclosure property);                 Line 1a. Cash flow investments are any invest-
that day.
                                                     2.  Foreign or U.S. possession income taxes;       ments  of  amounts  received  under  qualified 
Item C.  Total Assets  at End of Tax Year.—                                                             mortgages for a temporary period  (not more 
Enter the total assets of the REMIC. If there are    3.  Taxes not imposed on the REMIC; or 
                                                                                                        than 13 months) before distribution to holders of 
no assets at the end of the tax year, enter zero.    4.  Taxes, including State or local sales taxes,   interests in the REMIC.
Item E.  Hawaii Tax I.D.  No.—Enter the              that are paid or incurred in connection with 
REMIC’s Hawaii Tax I.D. No.                          an acquisition  or disposition  of property        Line 1b. Qualified reserve assets include any 
                                                     (such taxes must be treated as a part of the       intangible property which is held for investment 
Section I                                            cost of the acquired property or, in the case      and as part of a qualified reserve fund. For a 
                                                     of a disposition, as a reduction in the amount     definition of qualified reserve fund, including ex-
Line 1.  Taxable Interest.—Enter the total tax-      realized on the disposition).                      ceptions, see sections 860G(a)(7)(B) and (C).
able interest. “Taxable interest” is interest that                                                      Line 1c. Foreclosure property is any real prop-
is included in ordinary income from all sources      Note:   If you have to pay tax on net in-
except interest  exempt from tax  and interest       come  from  foreclosure  property,  you            erty (including  interests in real property), and 
on tax-free covenant bonds. You may elect to         should  include  this  tax  (from  line  10  of    any personal  property incident  to such real 
reduce the amount of interest accrued on tax-        federal Form 1066, Schedule J) here on             property,  acquired  by the REMIC as  a result 
able bonds by the amount of amortizable bond         line 11.                                           of the REMIC’s having  bid  in the property  at 
                                                                                                        foreclosure, or having otherwise reduced such 
premium on those bonds attributable to the cur-      See section 164(d) for  apportionment of           property to ownership or possession by agree-
rent tax year. See sections 171(c) and 171(e)        taxes on real property between the seller and      ment or process of law, after there was a default 
for details.                                         purchaser.                                         or  imminent  default  on  a  qualified  mortgage 
Line 2.  Accrued Market Discount  Under              Line 12. Depreciation from Federal Form            held by the REMIC. Generally, this property 
Section  860C(b)(1)(B).—Enter the amount of          4562.—Complete and attach federal Form             ceases to be foreclosure property at the close of 
market discount attributable to  the current tax     4562.                                              the third tax year following the tax year in which 
year determined on the basis of a constant in-       Note:   Hawaii  did  not  adopt  the  federal      the REMIC acquired the property. See sections 
terest rate under the rules of section 1276(b)(2).   provisions  for  bonus  depreciation  and          860G(a)(8), 856(e), and  Treasury Regulation 
Line 4.  Ordinary Gain (or Loss).—Enter the          the increased section 179 deduction.               section 1.856-6 for additional information.
net gain (or loss) from line 19, Part II, Schedule   If  a depreciation  deduction  is claimed for      Note:    Solely  for  purposes  of  section 
D-1.                                                 Hawaii  tax purposes, the REMIC must:  (a)         860D(a),  the  determination  of  whether 
Line 5.  Other Income.—Enter any other tax-          complete  a federal  Form 4562  for Hawaii  tax    any property is foreclosure property will 
able  income  not listed  above  and  explain  its   purposes, and (b) attach the completed federal     be made without regard to section 856(e)
nature on an attached schedule. If the REMIC         Form 4562 to the Hawaii tax return. The REMIC      (4).
issued regular interests at a premium, the net       must also keep records of the differences in the   Line  7. Regular  interests are interests in the 
amount of such premium is income that must be        asset’s depreciable basis for federal and Hawaii   REMIC that are issued on the startup day with 
prorated over the term of such interests. Include    tax purposes.                                      fixed terms and that are designated as regular 
such income on this line.                            Line 13. Other Deductions.—Enter any other         interests, if:
REMICs with a start-up date before Novem-            allowable  deductions  for which  no line  is pro- (1) such interest unconditionally  entitles the 
ber 12, 1991, enter any capital gain or (loss) on    vided on Form N-66.                                holder  to  receive  a  specified  principal 
line 5. Attach the schedule or statement to Form                                                        amount or other similar amounts; and
N-66.                                                                                                   (2) interest payments (or other similar amounts), 
                                                     Designation of Tax Matters Person 
Deductions. (Lines 7-14).—Do not include any                                                            if any, with respect to the interest at or be-
nondeductible amounts on lines 7-14. A REMIC         (TMP)                                              fore maturity are payable based on a fixed 
is not allowed the following deductions in com-                                                         rate (or to the extent provided in regulations, 
puting its taxable income:                           A REMIC may designate a tax matters person         at a variable rate), or consist of a specified 
                                                     in the same manner in which a partnership may      portion of the interest payments on qualified 
1.  The net operating loss deduction;                designate a tax matters partner under Treasury     mortgages and this portion does not vary 
2.  The deduction for taxes paid or accrued to       Regulation  section 301.6231(a)(7)-1.  For  pur-   during  the period that the interest is out-
foreign countries and U.S. possessions;              poses of applying that section, all holders of a   standing.
3.  The deduction for charitable contributions;      residual  interest in the REMIC are treated as 
                                                     general partners. The designation may be made      The interest will  meet the requirements  of 
4.  The deduction for depletion under section        by completing  the Designation  of  Tax Matters    subparagraph  (1) even  if the timing  (but not 
611 for oil and gas wells; and                       Person section on page 2 of Form N-66.             the amount) of the principal payments (or other 
5.  Losses or deductions allocable to prohibited                                                        similar amounts) is contingent on the extent of 
transactions.                                        Additional Information                             prepayments  on  qualified  mortgages  and  the 
                                                                                                        amount of income from permitted investments.
Line 9.  Amount  Accrued to  Regular Inter-          Be sure to answer the questions and provide 
est Holders in the REMIC That is Deductible          other information in items F through J. The in-    An interest will still qualify as a regular in-
as Interest.—Regular  interests in the REMIC         structions that follow are keyed to these items.   terest even if the specified principal amount of 
                                                                                                        the regular  interest (or the amount of interest 
are treated as indebtedness for federal income       Item F. Type of Entity.—Check the box for the      accrued on the regular interest) can be reduced 
tax purposes. Enter the amount of interest, in-      type of entity that the REMIC is recognized as     as a result of the nonoccurrence of 1 or more 
cluding original issue discount, paid or accrued     under State law. If the REMIC is not a separate    contingent  payments with respect to any re-
to regular interest holders for the tax year. Do     entity under State law, check the box for “Seg-    verse mortgage loan held by the REMIC if, on 
                                                     regated  Pool  of  Assets,”  and  state  the  name the startup day for the REMIC, the sponsor rea-
                                                                                                                                            Page 3

sonably believes that all principal and interest  Include  in column (d) tax-exempt interest        Schedule Q
due under the regular interest will be paid at or income, other tax-exempt income, income from 
prior to the liquidation of the REMIC.            prohibited transactions, income recorded on the   Quarterly Notice to Residual 
                                                  REMIC’s books but not included on this return, 
                                                  and allowable deductions not charged against      Interest Holder of REMIC Taxable 
Schedule M                                        book income this year.                            Income or Net Loss Allocation
Reconciliation of Residual Interest               Include  in column (e) capital  losses  in ex-    Attach a separate Copy  A, Schedule  Q 
                                                  cess of the $3,000 limitation, other nondeduct-   (Form N-66), to Form N-66 for each person who 
Holders’ Capital Accounts                         ible  amounts (such as losses from prohibited     was a residual interest holder at any time during 
Show what caused the changes in the residual      transactions and expenses connected with the      the tax year and for each quarter in which such 
interest holders’ capital accounts during the tax production of tax-exempt income), deductions      person was a residual holder.
year.                                             allocable  to prohibited  transactions,  expenses 
                                                  recorded on books not deducted on this return,    Although the REMIC is not subject to income 
The amounts shown should agree with the           and taxable income not recorded on books this     tax, the residual interest holders are liable  for 
REMIC’s  books and records and the balance        year.                                             tax on their shares of the REMIC’s taxable in-
sheet amounts. Attach a statement explaining                                                        come, whether or not distributed, and must in-
any differences.                                                                                    clude their shares on their tax returns.

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