Base Offering Circular – Multifamily 47 of itemized deductions otherwise allowable for the taxable year for an individual whose adjusted gross income exceeds a certain amount will be reduced.  In some cases, the amount of additional income that would be recognized as a result of the foregoing limitations by a Residual Holder who is an individual, trust, or estate could be substantial.  Non-corporate Holders of Residual Securities also should be aware that miscellaneous itemized deductions, including allocable investment expenses attributable to the related Trust REMIC, are not deductible for purposes of the AMT.  A Residual Holder’s share of the expenses will generally be determined by (i) allocating the amount of such expenses for each calendar quarter on a pro rata basis to each day in the calendar quarter, and (ii) allocating the daily amount among the Holders in proportion to their respective holding on such day.  Finally, persons holding an interest in a Residual Security indirectly through an interest in a RIC, common trust fund or one of certain corporations doing business as a cooperative generally will recognize a share of any excess inclusion allocable to that Residual Security. Employee benefit plans.  See “—Limitations on Offset or Exemption of REMIC Income”; “—Special Considerations for Certain Types of Investors—Tax-exempt entities” and “ERISA Considerations.” REITs and RICs.  If the Residual Holder is a REIT and the Trust REMIC generates excess inclusion income, a portion of REIT dividends will be treated as excess inclusion income for the REIT’s shareholders, in a manner to be provided by regulations.  Thus, shareholders in a REIT that invests in Residual Securities could face unfavorable treatment of a portion of their REIT dividend income for purposes of (i) using current deductions or NOL carryovers or carrybacks, (ii) UBTI in the case of tax-exempt shareholders, and (iii) withholding tax in the case of foreign shareholders (see “—Limitations on Offset or Exemption of REMIC Income— Foreign Residual Holders” below).  Moreover, because Residual Holders may recognize phantom income (see “—Tax Treatment of Residual Securities—Taxation of Residual Holders”), a REIT contemplating an investment in Residual Securities should consider carefully the effect of any phantom income upon its ability to meet its income distribution requirements under the Code.  The same rules regarding excess inclusion income will apply to a Residual Holder that is a RIC, common trust fund, or one of certain corporations doing business as a cooperative. A Residual Security held by a REIT will be treated as a real estate asset for purposes of the REIT qualification requirements in the same proportion that the Trust REMIC’s assets would be treated as real estate assets if held directly by the REIT, and interest income derived from such Residual Security will be treated as qualifying interest income for REIT purposes (“Qualifying REIT Interest”) to the same extent.  If 95% or more of a Trust REMIC’s assets qualify as real estate assets for REIT purposes, 100% of that Trust REMIC’s regular and residual interests (including Residual Securities) will be treated as real estate assets for REIT purposes, and all of the income derived from such interests will be treated as Qualifying REIT Interest.   The REMIC Regulations provide that payments of principal and interest on the qualified mortgages held by a Trust REMIC that are reinvested pending distribution to the Holders of the related REMIC’s Securities constitute real estate assets for REIT purposes.  Multiple Trust REMICs that are part of a tiered structure (as in the case of a Double REMIC Series) will be treated as one REMIC for purposes of determining the percentage of the assets of each Trust REMIC that constitutes real estate assets.  It is expected that at least 95% of the assets of a Trust