Base Offering Circular - Multifamily
482090
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Trust REMIC, it generally will not apply the Aggregation Rule to Regular Securities for purposes
of reporting to Holders.
The OID Regulations provide that a Holder generally may make an election (a Constant
Yield Election) to include in gross income all stated interest, OID, de minimis OID, market
discount (as described below under Market Discount), and de minimis market discount that
accrues on a Regular Security (as reduced by any amortizable premium, as described below under
Amortizable Premium or acquisition premium, as described below) under the constant yield
method used to account for OID. To make the Constant Yield Election, the Holder of the
Security must attach a statement to its timely filed federal income tax return for the taxable year
in which the Holder acquired the Security. The statement must identify the instruments to which
the election applies. A Constant Yield Election is irrevocable unless the Holder obtains the
consent of the Service. In general, the Constant Yield Election may be made on an obligation-
by-obligation basis. If, however a Constant Yield Election is made for a debt instrument with
market discount, the Holder is deemed to have made an election to include in income currently
the market discount on all debt instruments with market discount subsequently acquired during
the same tax year or thereafter by the Holder, as described in Market Discount below. In
addition, if a Constant Yield Election is made for a debt instrument with amortizable premium,
the Holder is deemed to have made an election to amortize the premium on all of the Holders
other debt instruments with amortizable premium under the constant yield method. See
Amortizable Premium below.
The federal income tax treatment of income on a Regular Security, the payments on
which consist entirely or primarily of a specified nonvarying portion of the interest payable on
one or more of the qualified mortgages held by the Trust REMIC (an Interest Weighted
Security), is unclear. Until the Service provides contrary administrative guidance on the income
tax treatment of an Interest Weighted Security, the Tax Administrator intends to take the position
that an Interest Weighted Security does not bear qualified stated interest and will account for the
income thereon as described in Certain Federal Income Tax ConsequencesOriginal Issue
DiscountInterest Weighted Securities and Non-VRDI Securities herein. Some Interest
Weighted Securities may provide for a relatively small amount of principal and for interest that
can be expressed as qualified stated interest at a very high fixed rate with respect to that principal
(Superpremium Securities). Superpremium Securities technically are issued with amortizable
premium. However, because of their close similarity to other Interest Weighted Securities, it
appears more appropriate to account for Superpremium Securities in the same manner as for
other Interest Weighted Securities. Consequently, in the absence of further administrative
guidance, the Tax Administrator intends to account for Superpremium Securities in the same
manner as other Interest Weighted Securities. However, there can be no assurance that the
Service will not assert a position contrary to that taken by the Tax Administrator, and, therefore,
Holders of Superpremium Securities should consider making a protective election to amortize
premium on such Securities.
The OID Regulations provide that if a principal purpose in structuring a debt instrument,
engaging in a transaction, or applying the OID Regulations is to achieve a result that is
unreasonable in light of the purposes of the applicable statutes, the Service can apply or depart
from the OID Regulations as necessary or appropriate to achieve a reasonable result. A result is