§860H. Taxation of a FASIT; other general rules

(a) Taxation of FASIT

A FASIT as such shall not be subject to taxation under this subtitle (and shall not be treated as a trust, partnership, corporation, or taxable mortgage pool).

(b) Taxation of holder of ownership interest

In determining the taxable income of the holder of the ownership interest in a FASIT-

(1) all assets, liabilities, and items of income, gain, deduction, loss, and credit of a FASIT shall be treated as assets, liabilities, and such items (as the case may be) of such holder,

(2) the constant yield method (including the rules of section 1272(a)(6)) shall be applied under an accrual method of accounting in determining all interest, acquisition discount, original issue discount, and market discount and all premium deductions or adjustments with respect to each debt instrument of the FASIT,

(3) there shall not be taken into account any item of income, gain, or deduction allocable to a prohibited transaction, and

(4) interest accrued by the FASIT which is exempt from tax imposed by this subtitle shall, when taken into account by such holder, be treated as ordinary income.

(c) Treatment of regular interests

For purposes of this title-

(1) a regular interest in a FASIT, if not otherwise a debt instrument, shall be treated as a debt instrument,

(2) section 163(e)(5) shall not apply to such an interest, and

(3) amounts includible in gross income with respect to such an interest shall be determined under an accrual method of accounting.

(Added Pub. L. 104–188, title I, §1621(a), Aug. 20, 1996, 110 Stat. 1858 .)

Effective Date

Part effective Sept. 1, 1997, see section 1621(d) of Pub. L. 104–188, set out as an Effective Date of 1996 Amendment note under section 26 of this title.