Base Offering Circular – Multifamily 37 The relevant legislative history indicates that, until the Treasury promulgates applicable regulations, the purchaser of a Regular Security with market discount generally may elect to accrue the market discount either:  (i) on the basis of a constant interest rate; (ii) in the case of a Regular Security not issued with OID, in the ratio of stated interest payable in the relevant period to the total stated interest remaining to be paid from the beginning of such period; or (iii) in the case of a Regular Security issued with OID, in the ratio of OID accrued for the relevant period to the total remaining OID at the beginning of such period.  Regardless of which computation method is elected, the Pricing Prepayment Assumptions must be used to calculate the accrual of market discount. A Holder who has acquired a Regular Security with market discount generally will be required to treat a portion of any gain on a sale or exchange of the Security as ordinary income to the extent of the market discount accrued to the date of disposition under one of the foregoing methods, less any accrued market discount previously reported as ordinary income as partial principal payments were received.  Moreover, such Holder generally must defer interest deductions attributable to any indebtedness incurred or continued to purchase or carry the Security to the extent they exceed income on the Security.  Any such deferred interest expense, in general, is allowed as a deduction not later than the year in which the related market discount income is recognized.  If a Regular Holder makes a Current Recognition Election or a Constant Yield Election, the interest deferral rule will not apply.  Under the Contingent Payment Regulations, a secondary market purchaser of a Non-VRDI Security or an Interest Weighted Security at a discount generally would continue to accrue interest and determine adjustments on such Security based on the original projected payment schedule devised by the issuer of such Security.  See “Certain Federal Income Tax Consequences—Original Issue Discount—Interest Weighted Securities and Non-VRDI Securities” herein.  The Holder of such a Security would be required, however, to allocate the difference between the adjusted issue price of the Security and its basis in the Security as positive adjustments to the accruals or projected payments on the Security over the remaining term of the Security in a reasonable manner (e.g., based on a constant yield to maturity). Treasury regulations implementing the market discount rules have not yet been issued, and uncertainty exists with respect to many aspects of those rules.  For example, the treatment of a Regular Security subject to redemption at the option of the Tax Administrator that is acquired at a market discount is unclear.  It appears likely, however, that the market discount rules applicable in such a case would be similar to the rules pertaining to OID.  Due to the substantial lack of regulatory guidance with respect to the market discount rules, it is unclear how those rules will affect any secondary market that develops for a given Class of Regular Securities.   Prospective investors in Regular Securities should consult their own tax advisors as to the application of the market discount rules to those Securities. Amortizable Premium A purchaser of a Regular Security who purchases the Security at a premium over the total of its Deemed Principal Payments may elect to amortize such premium under a constant yield method that reflects compounding based on the interval between payments on the Security.  The relevant legislative history indicates that premium is to be accrued in the same manner as market discount.  Accordingly, it appears that the accrual of premium on a Regular Security will be