Base Offering Circular – Multifamily 41 or market discount income on the Trust REMIC’s assets (including temporary cash flow investments) and premium amortization on the Trust REMIC’s Regular Interests less its deductions, including deductions for interest and OID expense on the Regular Interests, premium amortization and servicing fees on the Trust REMIC’s assets, and the administration expenses of the Trust REMIC and the Regular Interests.  However, the Trust REMIC may not take into account any items allocable to a “prohibited transaction.”  See “—Limitations on Offset or Exemption of REMIC Income—REMIC-Level Taxes.”  The deduction of Trust REMIC expenses by Residual Holders who are individuals is subject to certain limitations as described below in “Special Considerations for Certain Types of Investors-Individuals and Pass-Through Entities.”  Residual Holders should be aware that there are a number of ambiguities in the determination of interest, OID and premium on the Regular Securities and that some of these ambiguities may be resolved in a way that results in an acceleration of the income taxable to Residual Holders.  See “Tax Treatment of Regular Securities” above. The amount of the Trust REMIC’s net loss with respect to a calendar quarter that may be deducted by a Residual Holder is limited to such Holder’s adjusted basis in the Residual Security as of the end of that quarter (or time of disposition of the Residual Security, if earlier), determined without taking into account the net loss for that quarter.  A Residual Holder’s basis in its Residual Security initially is equal to the price paid for such Security.  Such basis is increased by the amount of income recognized with respect to the Residual Security and decreased (but not below zero) by the amount of distributions made and the amount of net losses recognized with respect to that Security.  The amount of the REMIC’s net loss allocable to a Residual Holder that is disallowed under the basis limitation may be carried forward indefinitely, but may be used only to offset income with respect to the related Residual Security.  The ability of Residual Holders to deduct net losses with respect to a Residual Security may be subject to additional limitations under the Code, as to which Holders should consult their tax advisors.  A distribution with respect to a Residual Security is treated as a non-taxable return of capital up to the amount of the Residual Holder’s adjusted basis in his Residual Security.  If a distribution exceeds the adjusted basis of the Residual Security, the excess is treated as gain from the sale of such Residual Security. Although the law is unclear in certain respects, a Residual Holder effectively should be able to recover some or all of the basis in its Residual Security as the Trust REMIC recovers the basis of its assets through either the amortization of premium on such assets or the allocation of basis to principal payments received on such assets.  The Trust REMIC’s initial aggregate basis in its assets will equal the sum of the issue prices of all related Residual Securities and Regular Interests.  In general, the issue price of a Regular Security of a particular Class is the initial price at which a substantial amount of the Securities of such Class is offered to the public.  In the case of a Regular Interest of a Class not offered to the public in substantial amounts, the issue price is either the price paid by the first purchaser of such Interest or the fair market value of the property received in exchange for such Interest, as appropriate.  The Trust REMIC’s aggregate basis will be allocated among its assets in proportion to their respective fair market values. The mortgage loans underlying the Trust Assets of certain Trust REMICs may have bases that exceed their principal amounts.  Except as indicated in “Treatment by the Trust REMIC of Original Issue Discount, Market Discount, and Amortizable Premium,” the premium on such loans will be amortizable under the constant yield method and the same prepayment assumptions