Income from REMICs

A real estate mortgage investment conduit (REMIC) is basically an entity formed to hold a number of mortgages secured by property, and to pay out the income to investors.

If you hold a "regular" interest in a REMIC, your investment income is treated as interest, and it will be reported to you on Form 1099-INT and Form 1099-OID. You'll have to report any OID, or market discount that applies, under the rules for bonds. The issuer should send you a notice with enough information to allow you to calculate the amounts to include in income. A "regular" interest is one that unconditionally entitles the holder to a specific principal amount. Any interest payments must be based on a specified interest rate (or formula for a variable rate) or a specified percentage of the interest on the mortgages.

Any interest in a REMIC that is not a "regular" interest is a "residual" one. If you own a residual interest, you should receive a Schedule Q (Form 1066) from the issuer at the end of the year. Information from the Schedule Q is transferred to Part IV of your Schedule E, Supplemental Income and Loss, according to the instructions on Schedule Q. Don't file the Schedule Q itself with your tax return.

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