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not include any amount attributable to a

Capital gain distributions. On line 7,

When selling stock, adjust the basis by

tax-exempt bond.

report the sum of: (a) capital gain

subtracting all the nontaxable distributions

distributions, and (b) the REMIC’s share

received before the sale. This includes

Line 11 — Taxes. Enter taxes accrued

of the undistributed capital gain from a

nontaxable dividends from utility company

during the tax year but do not include the

mutual fund or other regulated investment

stock and mutual funds. Also, adjust the

following:

•

company.

basis for any stock splits.

Federal income taxes (except the tax

See section 852(f) for the treatment of

on net income from foreclosure property);

For details, see Pub. 564, Mutual

•

Foreign or U.S. possession income

Fund Distributions.

certain load charges incurred in acquiring

taxes;

stock in a mutual fund with a reinvestment

Losses on worthless securities. If any

•

right.

Taxes not imposed on the REMIC; or

securities that are capital assets become

•

Taxes, including state or local sales

worthless during the tax year, the loss is a

Increase the cost or other basis by any

taxes, that are paid or incurred in

expense of sale, such as broker’s fee,

loss from the sale or exchange of capital

connection with an acquisition or

assets as of the last day of the tax year.

commission, and option premium, before

disposition of property (such taxes must

making an entry in column (e), unless the

Losses from wash sales. The REMIC

be treated as a part of the cost of the

REMIC reported net sales price in column

cannot deduct losses from a wash sale of

acquired property or, in the case of a

(d).

stock or securities. A wash sale occurs if

disposition, as a reduction in the amount

For details, see Pub. 551, Basis of

the REMIC acquires (by purchase or

realized on the disposition).

exchange), or has a contract or option to

Assets.

Note: If you have to pay tax on net

acquire, substantially identical stock or

Schedule J

income from foreclosure property, you

securities within 6 months before or after

should include this tax (from line 10 of

the date of the sale or exchange. See

Part I —Tax on Net Income from

Schedule J) here on line 11.

section 860F(d) for details.

Prohibited Transactions

See section 164(d) for apportionment

Installment sales. If the REMIC sold

of taxes on real property between the

Do not net losses from prohibited

property (except publicly traded stock or

seller and purchaser.

transactions against income or gains from

securities) at a gain and will receive any

prohibited transactions in determining the

payment in a tax year after the year of

Line 12 — Depreciation. See the

amounts to enter on lines 1a through 1d.

sale, it must use the installment method

instructions for Form 4562, Depreciation

These losses are not deductible in

and Form 6252, Installment Sale Income,

and Amortization, or Pub. 946, How To

computing net income from prohibited

unless it elects not to use the installment

Depreciate Property, to figure the amount

transactions.

method.

of depreciation to enter on this line. You

must complete and attach Form 4562 if

Note: For purposes of lines 1a and 1d,

If the REMIC wants to elect out of the

the REMIC placed property in service

the term “prohibited transactions” does

installment method, it must report the full

during 2003, claims a section 179

not include any disposition that is required

amount of the gain on a timely filed return

expense deduction, or claims

to prevent default on a regular interest

(including extensions). If the REMIC filed

depreciation on any car or other listed

where the threatened default resulted

its original return on time without making

property.

from a default on one or more qualified

the election, it may make the election on

mortgages, or to facilitate a clean-up call.

an amended return filed not later than 6

Line 13 — Other deductions. Attach a

A clean-up call is the redemption of a

schedule, listing by type and amount, any

months after the due date of the return

class of regular interests when, by reason

(excluding extensions). Write “Filed

other allowable deductions for which no

of prior payments with respect to those

pursuant to section 301.9100-2” at the top

line is provided on Form 1066. If there is

interests, the administrative costs

of the amended return.

only one item of other deductions,

associated with servicing that class

describe it in parentheses to the left of the

Specific Instructions

outweigh the benefits of maintaining the

entry on line 13 instead of attaching a

class. It does not include the redemption

schedule.

Column (d) — Sales price. Enter either

of a class in order to profit from a change

the gross sales price or the net sales

Schedule D

in interest rates.

price from the sale. On sales of stocks

Line 1a — Gain from certain

and bonds, report the gross amount as

General Instructions

dispositions of qualified mortgages.

reported to the REMIC by the REMIC’s

Enter the amount of gain from the

broker on Form 1099-B, Proceeds From

Purpose of schedule. For a REMIC with

disposition of any qualified mortgage

Broker and Barter Exchange

a startup day before November 12, 1991,

transferred to the REMIC other than a

Transactions, or similar statement.

use Schedule D to report the sale or

disposition from:

However, if the broker advised the

exchange of capital assets. To report

REMIC that gross proceeds (gross sales

sales or exchanges of property other than

1. The substitution of a qualified

price) minus commissions and option

capital assets, see Form 4797 and its

replacement mortgage for a qualified

premiums were reported to the IRS, enter

instructions.

mortgage (or the repurchase in lieu of

that net amount in column (d).

substitution of a defective obligation).

A REMIC with a startup day after

2. The foreclosure, default, or

Column (e) — Cost or other basis. In

November 11, 1991, must use Form 4797

imminent default of the mortgage.

general, the cost or other basis is the cost

instead of Schedule D because all of its

3. The bankruptcy or insolvency of the

of the property plus purchase

gains and losses from the sale or

REMIC.

commissions and improvements, minus

exchange of any property are treated as

4. A qualified liquidation.

depreciation. If the REMIC got the

ordinary gains and losses.

property in a tax-free exchange,

Report every sale or exchange of

See section 860F(a) for details and

involuntary conversion, or wash sale of

property in detail, even though there is no

exceptions.

stock, it may not be able to use the actual

gain or loss.

cash cost as the basis. If the REMIC uses

Line 1b — Income from nonpermitted

For details, see Pub. 544, Sales and

a basis other than cash cost, attach an

assets. Enter the amount of any income

Other Dispositions of Assets.

explanation.

received or accrued during the year

-5-

Instructions For Form 1066 - U.s. Real Estate Mortgage Investment Conduit (Remic) Income Tax Return - 2003 Page 5

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