
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC860I]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
Subchapter M--Regulated Investment Companies and Real Estate Investment 
                                 Trusts
 
        PART V--FINANCIAL ASSET SECURITIZATION INVESTMENT TRUSTS
 
Sec. 860I. Gain recognition on contributions to a FASIT and in 
        other cases
        

(a) Treatment of property acquired by FASIT

     (1) Property acquired from holder of ownership interest or 
                               related person

        If property is sold or contributed to a FASIT by the holder of 
    the ownership interest in such FASIT (or by a related person) gain 
    (if any) shall be recognized to such holder (or person) in an amount 
    equal to the excess (if any) of such property's value under 
    subsection (d) on the date of such sale or contribution over its 
    adjusted basis on such date.

     (2) Property acquired other than from holder of ownership 
                         interest or related person

        Property which is acquired by a FASIT other than in a 
    transaction to which paragraph (1) applies shall be treated--
            (A) as having been acquired by the holder of the ownership 
        interest in the FASIT for an amount equal to the FASIT's cost of 
        acquiring such property, and
            (B) as having been sold by such holder to the FASIT at its 
        value under subsection (d) on such date.

(b) Gain recognition on property outside FASIT which supports regular 
        interests

    If property held by the holder of the ownership interest in a FASIT 
(or by any person related to such holder) supports any regular interest 
in such FASIT--
        (1) gain shall be recognized to such holder (or person) in the 
    same manner as if such holder (or person) had sold such property at 
    its value under subsection (d) on the earliest date such property 
    supports such an interest, and
        (2) such property shall be treated as held by such FASIT for 
    purposes of this part.

(c) Deferral of gain recognition

    The Secretary may prescribe regulations which--
        (1) provide that gain otherwise recognized under subsection (a) 
    or (b) shall not be recognized before the earliest date on which 
    such property supports any regular interest in such FASIT or any 
    indebtedness of the holder of the ownership interest (or of any 
    person related to such holder), and
        (2) provide such adjustments to the other provisions of this 
    part to the extent appropriate in the context of the treatment 
    provided under paragraph (1).

(d) Valuation

    For purposes of this section--

                           (1) In general

        The value of any property under this subsection shall be--
            (A) in the case of a debt instrument which is not traded on 
        an established securities market, the sum of the present values 
        of the reasonably expected payments under such instrument 
        determined (in the manner provided by regulations prescribed by 
        the Secretary)--
                (i) as of the date of the event resulting in the gain 
            recognition under this section, and
                (ii) by using a discount rate equal to 120 percent of 
            the applicable Federal rate (as defined in section 1274(d)), 
            or such other discount rate specified in such regulations, 
            compounded semiannually, and

            (B) in the case of any other property, its fair market 
        value.

            (2) Special rule for revolving loan accounts

        For purposes of paragraph (1)--
            (A) each extension of credit (other than the accrual of 
        interest) on a revolving loan account shall be treated as a 
        separate debt instrument, and
            (B) payments on such extensions of credit having 
        substantially the same terms shall be applied to such extensions 
        beginning with the earliest such extension.

(e) Special rules

                (1) Nonrecognition rules not to apply

        Gain required to be recognized under this section shall be 
    recognized notwithstanding any other provision of this subtitle.

                        (2) Basis adjustments

        The basis of any property on which gain is recognized under this 
    section shall be increased by the amount of gain so recognized.

(Added Pub. L. 104-188, title I, Sec. 1621(a), Aug. 20, 1996, 110 Stat. 
1859.)


              Treatment of Existing Securitization Entities

    Section 1621(e) of Pub. L. 104-188 provided that:
    ``(1) In general.--In the case of the holder of the ownership 
interest in a pre-effective date FASIT--
        ``(A) gain shall not be recognized under section 860L(d)(2) of 
    the Internal Revenue Code of 1986 on property deemed contributed to 
    the FASIT, and
        ``(B) gain shall not be recognized under section 860I of such 
    Code on property contributed to such FASIT,
until such property (or portion thereof) ceases to be properly allocable 
to a pre-FASIT interest.
    ``(2) Allocation of property to pre-fasit interest.--For purposes of 
paragraph (1), property shall be allocated to a pre-FASIT interest in 
such manner as the Secretary of the Treasury may prescribe, except that 
all property in a FASIT shall be treated as properly allocable to pre-
FASIT interests if the fair market value of all such property does not 
exceed 107 percent of the aggregate principal amount of all outstanding 
pre-FASIT interests.
    ``(3) Definitions.--For purposes of this subsection--
        ``(A) Pre-effective date fasit.--The term `pre-effective date 
    FASIT' means any FASIT if the entity (with respect to which the 
    election under section 860L(a)(3) of such Code was made) is in 
    existence on August 31, 1997.
        ``(B) Pre-fasit interest.--The term `pre-FASIT interest' means 
    any interest in the entity referred to in subparagraph (A) which was 
    issued before the startup day (other than any interest held by the 
    holder of the ownership interest in the FASIT).''

                  Section Referred to in Other Sections

    This section is referred to in section 860L of this title.
