Base Offering Circular – Multifamily 44 transferee to acquire the interest, (b) the expected future distributions on the interest, and (c) any anticipated tax savings associated with holding the interest as the REMIC generates losses.  For purposes of this calculation, the present values generally are calculated using a discount rate equal to the federal short-term rate for the month of the transfer. Under the asset test, a transferor of a noneconomic residual interest generally will be presumed not to have improper knowledge if, in addition to meeting the conditions in (i), (ii) and (iii) above, (a) the transferee’s gross assets exceed $100 million and its net assets exceed $10 million, (b) the transferee is an “eligible corporation” as defined in Treasury regulations section 1.860E-1(c)(6)(i) other than a foreign permanent establishment of a domestic corporation, (c) the transferee agrees in writing that any subsequent transfer of the residual interest will comply with the asset test, (d) the transferor does not know or have reason to know that the transferee will not honor the restrictions on subsequent transfers of the residual interest, and (e) a reasonable person would not conclude, based on the facts and circumstances known to the transferor, that the taxes associated with the residual interest will not be paid.  Holders should consult their own tax advisors regarding the transfer of a Residual Certificate. Ownership of Residual Interests by Disqualified Organizations The Code contains three sanctions that are designed to prevent or discourage the direct or indirect ownership of a REMIC residual interest (such as a Residual Security) by the United States, any state or political subdivision thereof, any foreign government, any international organization, any agency or instrumentality of any of the foregoing, any tax-exempt organization (other than a farmers’ cooperative described in section 521 of the Code) that is not subject to the tax on UBTI, or any rural electrical or telephone cooperative (each a “Disqualified Organization”).  A corporation is not treated as an instrumentality of the United States or any state or political subdivision thereof if all of its activities are subject to tax and, with the exception of FHLMC, a majority of its board of directors is not selected by such governmental unit. First, the REMIC status of any REMIC created after March 31, 1988 is dependent upon the presence of reasonable arrangements designed to prevent a Disqualified Organization from acquiring record ownership of a residual interest.  Residual Securities are not offered for sale to Disqualified Organizations.  Furthermore, (i) Residual Securities will be registered as to both principal and any stated interest with the Trustee (or its agent) and transfer of a Residual Security may be effected only by surrender of the old Residual Security and reissuance by the Trustee of a new Residual Security to the new Holder, (ii) the applicable Trust Agreement will prohibit the ownership of Residual Securities by Disqualified Organizations, and (iii) each Residual Security will contain a legend providing notice of that prohibition.  Consequently, each Trust REMIC should be considered to have made reasonable arrangements designed to prevent the ownership of residual interests by Disqualified Organizations. Second, the Code imposes a one-time tax on the transferor of a residual interest (including a Residual Security or an interest in a Residual Security) to a Disqualified Organization.  The one-time tax equals the product of (i) the present value of the total anticipated excess inclusions with respect to the transferred residual interest for periods after the transfer and (ii) the highest marginal federal income tax rate applicable to corporations.  Under the REMIC