Overview of tax issues in securitizations.

Description of different categories of securities, including pass-through certificates, stripped certificates, pay-through bonds, REMIC interests, FASIT interests, asset-backed commercial paper, NIMs, covered bonds, CDOs and other debt of offshore issuers, and tender option bonds representing interests in municipal bonds.

When is a transfer of receivables a sale for tax purposes? How are the tax tests different from GAAP and bankruptcy "true sale" standards?

When is a debt instrument issued by a structured vehicle likely to be recharacterized as equity? When can trust certificates be treated as debt?

How are trusts/LLCs that are used in securitizations classified for tax purposes under Treasury classification rules (check-the-box rules, Sears regulations, power-to-vary test)?  How active can a trust be and still be a grantor trust? Can it hold derivatives?  How are entities divided into series classified?  When does a vehicle that acquires loans over time become a loan originator that can suffer adverse tax consequences?  The discussion covers the publicly traded partnership and taxable mortgage pool rules.

How does the tax treatment of grantor trusts differ from tax partnerships?

Extensive discussion of REMICs and permitted REMIC securities, REMIC servicing issues (debt modifications), phantom income, excess inclusions and REMIC residual trading.  REMICs holding defaulted loans receive a full treatment.  There is an extensive discussion of the techniques for creating different categories of REMIC regular interests, with examples.  Re-REMICs and REMICs packaged with other financial instruments are also covered.

Treatment of securities taxed as debt.  The topics addressed include: original issue discount and market discount, stripped bonds and coupons, bond premium, the effect of prepayment assumptions, special conventions for pools of loans, treatment of prepayment losses on IO securities, treatment of financially troubled assets and foreclosures, modifications of debt purchased at a discount, debt integration and payment lags.


Tax treatment of taxable mortgage pools.

Treatment of special categories of investors (REITs, banks and thrifts, and securities dealers).  The mark-to-market rules for dealers are covered in depth.  There is a new discussion of hard-to-value securities and book-tax conformity.

Taxation of foreign investors, including the new FATCA rules, and the way in which withholding taxes apply to swap income, fees and various other categories of non-interest income.

Offshore issuers, including how "active" they can be in the U.S. without being engaged in a trade or business, and the treatment of U.S. investors holding equity under the PFIC and CFC regimes.  An Appendix to the book has a set of illustrative CDO trade or business guidelines.

Information reporting for issuers and investors, including the new WHFIT, FATCA and FBAR rules and rules for offshore entities.

Taxation of sponsors (including special issues relating to excess servicing, consolidated returns and mark-to-market rules).

An extensive discussion of when property is divided up (bifurcated) or aggregated for tax law purposes.  This is an important topic that is rarely addressed in a comprehensive way.

Discussion of aggressive tax planning in securitization, and reporting and other measures that have been adopted to combat it, tax strategy patents, and securitization reform measures.

A Glossary defines terms used in the book.

Appendices describe the state-law rules governing REMICs, reproduce the text of applicable Internal Revenue Code sections and regulations, and provide illustrative trade or business guidelines for a CDO issuer..

Topics Covered       Used in IRS Training Programs