Fees paid to induce taxpayers to become the holders of noneconomic residual interests in real estate mortgage investment conduits have to be accounted for in certain ways under regulations that went into effect May 11.Under the Internal Revenue Service regulations, the fees must be included in income over a period during which the applicable REMIC is expected to generate taxable income or net loss allocable to the holder of the noneconomic residual interest. In addition, the new rules published in the Federal Register specify that the fees generally may not be taken into account in a single tax year. The new regulations also establish two safe-harbor methods of accounting for the fees and a rule clarifying that the fees are considered "income from sources within the United States."

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