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Foreign Partnerships. See the instructions

1.860G-1(a)(3)), or consist of a specified

whether or not distributed, and must

for these forms for more information.

portion of the interest payments on

include their shares on their tax returns.

qualified mortgages and this portion does

Item L — Sum of the daily accruals.

General Instructions

not vary during the period that the interest

Enter the total of the daily accruals for all

is outstanding.

For each calendar quarter complete

residual interests for the calendar year.

Schedule Q (Form 1066) for each person

See section 860E(c)(2) for details.

The interest will meet the requirements

who was a residual interest holder at any

of 1 above even if the timing (but not the

Schedule L—Balance Sheets

time during the quarter. File Schedule Q

amount) of the principal payments (or

per Books

with Form 1066; give one copy to the

other similar amounts) is contingent on

residual interest holder by the last day of

The amounts shown should agree with

the extent of prepayments on qualified

the month following the month in which

the REMIC’s books and records. Attach a

mortgages and the amount of income

the calendar quarter ends; and, keep one

statement explaining any differences.

from permitted investments.

copy with a copy of Form 1066 as part of

Line 1a — Cash flow investments are

Schedule M—Reconciliation of

the REMIC’s records.

any investments of amounts received

Residual Interest Holders’

under qualified mortgages for a temporary

Specific Instructions

Capital Accounts

period (not more than 13 months) before

On each Schedule Q, enter the names,

Show what caused the changes in the

distribution to holders of interests in the

addresses, and identifying numbers of the

residual interest holders’ capital accounts

REMIC.

residual interest holder and REMIC. For

during the tax year.

Line 1b — Qualified reserve assets

each residual interest holder that is an

The amounts shown should agree with

include any intangible property that is

individual, you must enter the residual

the REMIC’s books and records and the

held for investment and as part of any

interest holder’s social security number

balance sheet amounts. Attach a

reasonably required reserve to provide for

(or individual taxpayer identification

statement explaining any differences.

full payment of expenses of the REMIC or

number (ITIN) for a resident or

amounts due on regular interests in the

Include in column (d): tax-exempt

nonresident alien). For all other residual

event of defaults on qualified mortgages

interest income, other tax-exempt income,

interest holders, you must enter the

or lower than expected returns on cash

income from prohibited transactions,

residual interest holder’s EIN. However, if

flow investments. No more than 30% of

income recorded on the REMIC’s books

a residual interest holder is an individual

the gross income from such assets may

but not included on this return, and

retirement arrangement (IRA), enter the

be derived from the sale or disposition of

allowable deductions not charged against

identifying number of the IRA trust. Do not

property held less than 3 months. See

book income this year.

enter the social security number (or ITIN)

section 860G(a)(7)(C) for details and

of the individual for whom the IRA is

Include in column (e): capital losses

exceptions.

maintained.

over the $3,000 limitation (for a REMIC

Line 1c — Foreclosure property is any

with a startup day before November 12,

Item A — What type of entity is this

real property (including interests in real

1991), other nondeductible amounts

residual interest holder? State on this

property), and any personal property

(such as losses from prohibited

line whether the residual interest holder is

incident to such real property, acquired by

transactions and expenses connected

an individual, a corporation, an estate, a

the REMIC as a result of the REMIC’s

with the production of tax-exempt

trust, a partnership, an exempt

having bid in the property at foreclosure,

income), deductions allocable to

organization, a nominee (custodian), or

or having otherwise reduced the property

prohibited transactions, expenses

another REMIC. If the residual interest

to ownership or possession by agreement

recorded on books not deducted on this

holder is a nominee, use the following

or process of law, after there was a

return, and taxable income not recorded

codes to indicate in parentheses the type

default or imminent default on a qualified

on books this year.

of entity the nominee represents.

mortgage held by the REMIC. Generally,

I – Individual; C – Corporation; F –

this property ceases to be foreclosure

Estate or Trust; P – Partnership; E –

Schedule Q—Quarterly

property at the close of the third tax year

Exempt Organization; R – REMIC; or IRA

following the tax year in which the REMIC

Notice to Residual Interest

– Individual Retirement Arrangement.

acquired the property. See sections

860G(a)(8), 856(e), and Regulations

Holder of REMIC Taxable

Item B — Residual interest holder’s

section 1.856-6 for more details.

percentage of ownership. Enter in item

Income or Net Loss

B2 the percentage at the end of the

Note: Solely for purposes of section

calendar quarter. However, if a residual

Allocation

860D(a), the determination of whether

interest holder’s percentage of ownership

any property is foreclosure property will

changed during the quarter, enter in item

Purpose of Schedule

be made without regard to section

B1 the percentage immediately before the

856(e)(4).

Schedule Q (Form 1066) shows each

change. If there are multiple changes in

residual interest holder’s share of the

Line 7 — Regular interests are interests

the percentage of ownership during the

REMIC’s quarterly taxable income (net

in the REMIC that are issued on the

quarter, attach a statement giving the

loss), the excess inclusion for the residual

startup day with fixed terms and that are

date and percentage before each change.

designated as regular interests, if:

interest holder’s interest, and the residual

interest holder’s share of the REMIC’s

Item C — REMIC assets. Enter in item C

1. Such interest unconditionally

section 212 expenses for the quarter.

the percentage of the REMIC’s assets

entitles the holder to receive a specified

during the calendar quarter represented

principal amount or other similar amounts;

Although the REMIC is not subject to

by each of the following categories of

and

income tax (except on net income from

assets:

2. Interest payments (or similar

prohibited transactions, net income from

amounts), if any, with respect to the

foreclosure property, and contributions

1. Real estate assets under section

interest at or before maturity are payable

made after the startup day), the residual

856(c)(5)(B); and

based on a fixed rate (or at a variable rate

interest holders are liable for tax on their

2. Assets described in section

described in Regulations section

shares of the REMIC’s taxable income,

7701(a)(19)(C) (relating to the definition

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Instructions For Form 1066 - U.s. Real Estate Mortgage Investment Conduit (Remic) Income Tax Return - 2002 Page 7

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