Abstract
This Article provides a comprehensive analysis of the tax issues associated with creating, issuing, holding and trading REMIC residual interests. This far ranging inquiry is necessary because REMIC residual interests are a novelty and do not fit within, nor are they readily analogized to, normal tax concepts and rules that apply to other financial instruments. For example, the tax laws have spent many decades working out the appropriate treatment of debt and equity, and how to distinguish between the two. And in recent years the tax laws have become increasingly adept at untangling the tax treatment of various derivative financial instruments, such as notional principal contracts. Yet, the REMIC residual interest is neither debt, equity, option nor notional principal contract—although it has points of similarity to each of these—and consequently it has the fortune or misfortune of entering the marketplace with no applicable tax common law to help establish the appropriate tax treatment. As a result, although a handful of specific provisions in the REMIC rules resolve a great many issues, the tax treatment of residual interests is unsettled in a number of important respects.
This Article seeks to catalogue the tax aspects of residual interests and, in doing so, to identify the open issues, address the relevant tax policy considerations, and suggest possible solutions.
Recommended Citation
Van Brunt, Kirk
(1995)
"Tax Aspects of REMIC Residual Interests,"
Florida Tax Review: Vol. 2:
No.
1, Article 4.
Available at:
https://scholarship.law.ufl.edu/ftr/vol2/iss1/4