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.....Federal Income Taxation of Securitization Transactions (3rd edition, Frank J. Fabozzi Associates, 2001) is a new edition of The Federal Income Taxation of Mortgage-Backed Securities, last published in 1994. It has been expanded to cover securities backed by non-mortgage assets (including revolving pools) and updated to reflect the many changes in the law and in practice that have occurred since 1994. The title of the book has been changed from prior editions to reflect not only the inclusion of other asset-backed securities within its scope, but also the fact that it addresses securitization transactions broadly, from the perspective of the sponsor, issuer, and investors, and not just the resulting securities. As in earlier editions, the text is written in "plain English" so that it will be accessible to anyone with an interest in the area. More technical points are addressed in footnotes which also include citations. To keep the book current, the authors have periodically posted on this web site free updates. While the book focuses on securitization transactions, many of the topics discussed are relevant to a broad range of capital markets transactions and instruments. Topics addressed in the book include:
- Overview of tax issues in securitizations.
- When is a transfer of receivables a sale for tax purposes? How are the tax tests different from GAAP (FAS 140) 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 grant or trust? When does a vehicle that acquires loans over time become a loan originator that can suffer adverse tax consequences?
- How does the tax treatment of grant or 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 (including recent changes in safe harbors).
- Treatment of securities taxed as debt. Original issue discount, stripped bonds and coupons, bond premium, treatment of prepayment losses on IO securities, treatment of financially troubled assets and foreclosures.
- New rules for applying prepayment assumptions to pools of loans(including grant or trusts). How will they work in practice?
- Taxation of swaps and other derivatives packaged together with receivables.
- Taxable mortgage pools. How do the rules apply to various revolving pool structures?
- Treatment of special categories of investors (REITs, banks and thrifts, and securities dealers). When does a loan originator become a securities "dealer" and how do mark to market rules then apply?
- Taxation of foreign investors.
- Offshore issuers, including how "active" they can be in the US, and the treatment of US investors holding equity under PFIC, CFC and other anti-deferral regimes.
- Information reporting for trusts and partnerships and offshore entities.
- Discussion of new rules for widely held fixed investment trusts and foreign trusts.
- Taxation of sponsors (including special issues relating to excess servicing, consolidated returns and mark-to-market rules).
- Extensive discussion of FASITs and the new FASIT regulations. A practical guide to when FASITs are still useful and what can be done before regulations are fixed.
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