Base Offering Circular – Multifamily 43 quarters, decreased by any distributions made with respect to such Residual Security prior to the beginning of such quarterly period.  If the Residual Holder is an organization subject to the tax on unrelated business income imposed by Code section 511, the Residual Holder’s excess inclusion income will be treated as UBTI.  In addition, under Treasury regulations yet to be issued, if a REIT or a RIC owns a Residual Security that generates excess inclusion income, a pro rata portion of the dividends paid by the REIT or the RIC generally will constitute excess inclusion income for the shareholders.  With respect to variable contracts (within the meaning of section 817 of the Code), a life insurance company cannot adjust its reserve to the extent of any excess inclusion, except as provided in regulations.  Finally, for purposes of the AMT, excess inclusion income cannot be offset by current losses or NOLs of a Residual Holder (although the Holder does not have to include in AMT income preference items for which the Holder received no benefit as a result of the foregoing restriction). Non-Recognition of Certain Transfers for Federal Income Tax Purposes In addition to the limitations specified above, the REMIC Regulations provide that the transfer of a “noneconomic residual interest” to a United States person will be disregarded for tax purposes unless no significant purpose of the transfer was to impede the assessment or collection of tax.  A Residual Security will constitute a noneconomic residual interest unless, at the time the interest is transferred, (i) the present value of the expected future distributions with respect to the Residual Security equals or exceeds the product of the present value of the anticipated excess inclusion income and the highest corporate tax rate for the year in which the transfer occurs and (ii) the transferor reasonably expects that the transferee will receive distributions from the Trust REMIC in amounts sufficient to satisfy the taxes on excess inclusion income as they accrue.  If a transfer of a residual interest is disregarded, the transferor would continue to be treated as the owner of the Residual Security and thus would continue to be subject to tax on its allocable portion of the net income of the related Trust REMIC.  A significant purpose to impede the assessment or collection of tax exists if the transferor, at the time of the transfer, either knew or should have known that the transferee would be unwilling or unable to pay taxes due on its share of the taxable income of the REMIC (i.e., the transferor had “improper knowledge”).  Under the REMIC Regulations, a transferor is presumed not to have such improper knowledge if (i) the transferor conducted, at the time of the transfer, a reasonable investigation of the financial condition of the transferee and, as a result of the investigation, the transferor found that the transferee had historically paid its debts as they came due and found no significant evidence to indicate that the transferee would not continue to pay its debts as they come due, (ii) the transferee represents to the transferor that it understands that, as the Holder of a noneconomic residual interest, it may incur tax liabilities in excess of any cash flows generated by the interest and that it intends to pay the taxes associated with holding the residual interest as they become due, (iii) the transferee represents that it will not cause income from the noneconomic residual interest to be attributable to a foreign permanent establishment or fixed base (within the meaning of an applicable income tax treaty) of the transferee or another U.S. taxpayer, and (iv) the transferee satisfies either the formula test or the asset test described below. Under the formula test, the transferor of a noneconomic residual interest generally will be presumed not to have improper knowledge if, in addition to meeting conditions (i), (ii) and (iii) above, the present value of the anticipated tax liabilities associated with holding the residual interest does not exceed the sum of the present values of (a) any consideration given to the