FLOATING RATE UNDER PROPOSED OID RULES QUALIFIES AS VARIABLE RATE FOR REMICs.

Notice 93-11

This notice provides guidance with respect to certain provisions of the Income Tax Regulations issued under section 860G of the Internal Revenue Code concerning real estate mortgage investment conduits, or REMICs. Taxpayers may rely on this notice until final regulations issued under sections 1271 through 1275 of the Code relating to variable rate debt instruments become effective. At that time, section 1.860G-1(a)(3) of the Income Tax Regulations will be amended to conform to the language of the final regulations.

Section 860G(a)(1) of the Code defines the term "regular interest" to mean an interest that, among other things, "provides that interest payments (or other similar amounts), if any, at or before maturity are payable based on a fixed rate (or to the extent provided in regulations, at a variable rate)."

Section 1.860G-1(a)(3)(i) of the regulations provides that a rate that is a "qualifying variable rate" for purposes of sections 1271 through 1275 of the Code and the related regulations is a variable rate.

Proposed section 1.1275-5, as published in the Federal Register for December 22, 1992, (57 FR 60750, 60775), provides rules under sections 1271 through 1275 of the Code for variable rate debt instruments. These rules are proposed to be effective for debt instruments issued on or after the date that is 60 days after the date the regulations are finalized.

Solely for purposes of section 860G(a)(1) of the Code, a qualified floating rate as defined in proposed section 1.1275-5(b)(1) set at a current value, as defined in proposed section 1.1275- 5(a)(4), is a "qualifying variable rate" within the meaning of section 1.860G-1(a)(3)(i) of the regulations.

The principal author of this notice is Carol Schwartz of the Office of Assistant Chief Counsel (Financial Institutions & Products). For further information regarding this notice contact Carol Schwartz on (202) 622-3920 (not a toll-free call).