Hawaii Quarterly Notice to Residual Interest Holder of REMIC Taxable Income or Net Loss Allocation

Quarterly Notice to Residual Interest Holder of REMIC Taxable Income or Net Loss Allocation
Schedule Q Form N-66, Rev. 2017, Quarterly Notice to Residual Interest Holder of REMIC Taxable Income or Net Loss Allocation
Clear Form

STATE OF HAWAII — DEPARTMENT OF TAXATION

SCHEDULE Q

Quarterly Notice to Residual Interest Holder of
REMIC Taxable Income or Net Loss Allocation

(FORM N-66)
(REV. 2017)
	
	

Copy A — File
with Form N-66

For calendar quarter ended             , 20    
(Complete for each residual interest holder—See Instructions on back of Copy C.)

Residual interest holder’s identifying number	

REMIC’s identifying number

Residual interest holder’s name, mailing address, and Postal/ZIP code	

REMIC’s name, mailing address, and Postal/ZIP code

What type of entity is the residual interest holder? .......................................................................................
Enter residual interest holder’s percentage of ownership of all residual interests:
(i)	 Before change: ...............%
(ii)	 End of quarter: ...............%
Enter the percentage of the REMIC’s assets for the quarter represented by each of the following:
(i)	 Real estate assets under IRC section 856(c)(5)(B)  ...............%
(ii)	 Assets described in IRC section 7701(a)(19)(C) (relating to the
	
definition of a domestic building and loan association) ...............%
D	 Check applicable boxes:	 (1)  Final Schedule Q	 (2)  Amended Schedule Q
E	 Reconciliation of residual interest holder’s capital account:
A	
B	
	
	
C	
	
	

(a)
Capital account
at beginning of
quarter

(b)
Capital
contributed
during quarter

(c)
Taxable income
(net loss) from
line 1b below

(d)

(e)

Nontaxable
income

Unallowable
deductions

(	

(f)
Withdrawals
and
distributions

)	(	

(g)
Capital account
at end of quarter
(combine cols. (a)
through (f))

)

Caution: Refer to Instructions for Residual Interest Holder on back of Copy B before entering information from this schedule on your tax return.

1	a	 Taxable income (net loss) of the REMIC for the calendar quarter...............................................................
	 b	 Your share of the taxable income (net loss) for the calendar quarter.............................................................................................
2	a	 Sum of the daily accruals under IRC section 860E for all residual interests for the calendar quarter ........
	 b	 Sum of the daily accruals under IRC section 860E with respect to your interest for the calendar quarter.....................................
	 c	 Excess inclusion for the calendar quarter with respect to your residual interest (Subtract line 2b from line 1b, but do not enter
less than zero)................................................................................................................................................................................
3		 Residual interest holders who are individuals or other pass-through interest holders. (See
Instructions.) (Not required to be completed for other entities):
	 a	 IRC section 212 expenses of the REMIC for the calendar quarter..............................................................
	 b	 Your share of IRC section 212 expenses for the calendar quarter. (If you are an individual, this amount must be included in
gross income in addition to the amount shown on line 1b. See Instructions for treatment of this amount as a miscellaneous
itemized deduction if you are an individual.)...................................................................................................................................
SCHEDULE Q (FORM N-66)

STATE OF HAWAII — DEPARTMENT OF TAXATION

SCHEDULE Q

Quarterly Notice to Residual Interest Holder of
REMIC Taxable Income or Net Loss Allocation

(FORM N-66)
(REV. 2017)
	
	

Copy B — For
Residual Holder

For calendar quarter ended             , 20    
(Complete for each residual interest holder—See Instructions on back of Copy C.)

Residual interest holder’s identifying number	

REMIC’s identifying number

Residual interest holder’s name, mailing address, and Postal/ZIP code	

REMIC’s name, mailing address, and Postal/ZIP code

What type of entity is the residual interest holder? .......................................................................................
Enter residual interest holder’s percentage of ownership of all residual interests:
(i)	 Before change: ...............%
(ii)	 End of quarter: ...............%
Enter the percentage of the REMIC’s assets for the quarter represented by each of the following:
(i)	 Real estate assets under IRC section 856(c)(5)(B)  ...............%
(ii)	 Assets described in IRC section 7701(a)(19)(C) (relating to the
	
definition of a domestic building and loan association) ...............%
D	 Check applicable boxes:	 (1)  Final Schedule Q	 (2)  Amended Schedule Q
E	 Reconciliation of residual interest holder’s capital account:
A	
B	
	
	
C	
	
	

(a)
Capital account
at beginning of
quarter

(b)
Capital
contributed
during quarter

(c)
Taxable income
(net loss) from
line 1b below

(d)

(e)

Nontaxable
income

Unallowable
deductions

(	

(f)
Withdrawals
and
distributions

)	(	

(g)
Capital account
at end of quarter
(combine cols. (a)
through (f))

)

Caution: Refer to Instructions for Residual Interest Holder on back of Copy B before entering information from this schedule on your tax return.

1	a	 Taxable income (net loss) of the REMIC for the calendar quarter...............................................................
	 b	 Your share of the taxable income (net loss) for the calendar quarter.............................................................................................
2	a	 Sum of the daily accruals under IRC section 860E for all residual interests for the calendar quarter ........
	 b	 Sum of the daily accruals under IRC section 860E with respect to your interest for the calendar quarter.....................................
	 c	 Excess inclusion for the calendar quarter with respect to your residual interest (Subtract line 2b from line 1b, but do not enter
less than zero)................................................................................................................................................................................
3		 Residual interest holders who are individuals or other pass-through interest holders. (See
Instructions.) (Not required to be completed for other entities):
	 a	 IRC section 212 expenses of the REMIC for the calendar quarter..............................................................
	 b	 Your share of IRC section 212 expenses for the calendar quarter. (If you are an individual, this amount must be included in
gross income in addition to the amount shown on line 1b. See Instructions for treatment of this amount as a miscellaneous
itemized deduction if you are an individual.)...................................................................................................................................
SCHEDULE Q (FORM N-66)

Instructions for Residual Interest Holder
(Section references are to the Internal Revenue Code unless otherwise
noted.)

Purpose
The real estate mortgage investment conduit (REMIC) uses Schedule Q
to notify you of your share of the REMIC’s quarterly taxable income (or net
loss), the excess inclusion with respect to your interest, and your share of
the REMIC’s section 212 expenses for the quarter.
Please keep your copy of this schedule for your records. Do not file it with
your tax return.

General Instructions
These instructions will help you report the items shown on Schedule Q on
your tax return.
Tax treatment of REMIC items.—Although the REMIC is not subject to
income tax, you are liable for tax on your share of the REMIC’s taxable
income, whether or not distributed, and you must include your share on
your tax return. Generally, you must report REMIC items shown on your
Schedule Q (and any attached schedules) or similar statement consistent
with the way the REMIC treated the items on the return it filed. This rule
does not apply if your REMIC falls within the “small REMIC” exception and
does not elect to be subject to the consolidated entity-level audit procedures
enacted by TEFRA.
If your treatment on your original or amended return is (or may be)
inconsistent with the REMIC’s treatment, or if the REMIC was required to
file but has not filed a return, you must file federal Form 8082, Notice of
Inconsistent Treatment or Administrative Adjustment Request (AAR), with
your original or amended return to identify and explain the inconsistency (or
to note that a REMIC return has not been filed). See sections 860F(e) and
6222 for the inconsistent treatment rules.
Errors.—If you believe the REMIC has made an error on your Schedule Q,
notify the REMIC and ask for a corrected Schedule Q. Do not change any
items on your copy. Be sure that the REMIC sends a copy of the corrected
Schedule Q to the Department of Taxation. If you are unable to reach an
agreement with the REMIC with regard to the inconsistency, you must file
federal Form 8082 as explained in the previous paragraph.
Limitation on losses.—Generally, you may not claim your share of the
quarterly net loss from a REMIC that is greater than the adjusted basis
of your residual interest in the REMIC at the end of the calendar quarter
(determined without regard to your share of the net loss of the REMIC for
that quarter). Any loss disallowed because it exceeds your adjusted basis
is treated as incurred by the REMIC in the following quarter, but only for the
purpose of offsetting your share of REMIC taxable income for that quarter.
Items which increase your basis are:
(a)	 Money and your adjusted basis in property contributed to the
REMIC.
(b)	 Your share of the REMIC’s taxable income.
(c)	 Any income reported under the provisions of section
860F(b)(1)(C)(ii).
Items which decrease your basis are:
(a)	 Money and the fair market value of property distributed to you.
(b)	 Your share of the REMIC’s losses.
(c)	 Any deduction claimed under the provisions of section
860F(b)(1)(D)(ii).
Passive activity limitations under section 469.—Amounts includible in
income (or deductible as a loss) by a residual interest holder are treated as
portfolio income (or loss). Such income (or loss) is not taken into account in
determining the loss from a passive activity under section 469.
Rounding Off to Whole-Dollar Amounts — The Department of Taxation
is requiring all business income tax filers to round off cents to the nearest
whole dollar for all dollar entries on the tax return and schedules.

Specific Instructions
Item C. REMIC assets—This information is provided only for the use of a
residual interest holder such as a real estate investment trust or domestic
building and loan association that needs to know the composition of the
REMIC’s underlying assets.

Line 1b. Your share of the taxable income (net loss) for the calendar
quarter.—
Calendar year taxpayers and fiscal year taxpayers whose tax years end with
a calendar quarter: You must report, as ordinary income or loss, the total of
the amounts shown on line 1b of Schedule Q for each quarter included in
your tax year, after applying any basis limitations, on your tax return.
Fiscal year taxpayers whose tax years do not end with a calendar
quarter: The same rules indicated above for calendar year taxpayers apply,
except that you must figure the amount to report based on your tax year.
For each calendar quarter that overlaps the beginning or end of your tax
year, divide the amounts shown on line 1a by the number of days in that
quarter. Multiply the result by your percentage of ownership of all residual
interests for each day of your tax year included in that quarter. Total the
daily amounts of taxable income (or net loss) for the overlapping quarters.
Add these amounts to the amounts shown on line 1b for the full quarters
included in your tax year. Report the resulting income or loss in the same
manner as explained above for calendar year taxpayers.
Line 2c. Excess inclusion for the calendar quarter with respect to your
residual interest.—
Calendar year taxpayers and fiscal year taxpayers whose tax years end
with a calendar quarter: The total of the amounts shown on line 2c for all
quarters included in your tax year is the smallest amount of taxable income
you may report for that year. Except where necessary or appropriate to
prevent avoidance of Federal income tax the preceding sentence does not
apply to a financial institution entitled to relief under section 1616(c)(4) of the
Small Business Job Protection Act of 1996. That provision generally allows
certain financial institutions to continue using the rules of section 860E(a)
(2) prior to its amendment by the Act. (Special rules apply to members of
affiliated groups filing consolidated returns and to which section 1616(c)(4)
of the Act applies. See sections 860E(a)(3) and (4) prior to their amendment
by the Act.) The line 2c amount is treated as “unrelated business taxable
income” if you are an exempt organization subject to the unrelated business
tax under section 511. If you are an individual, and if you must report this
amount as your taxable income, enter the amount shown on line 2c on the
taxable income line of your return and write “Sch. Q” on the dotted line to
the left of the entry space.
Fiscal year taxpayers whose tax years do not end with a calendar
quarter: The same rules indicated above for calendar year taxpayers apply,
except that you must figure the excess inclusion based on your tax year.
For each calendar quarter that overlaps the beginning or end of your tax
year, divide the amount shown on line 2a by the number of days in that
quarter. Multiply the result by your percentage of ownership of all residual
interests for each day of your tax year included in that quarter. Total the daily
amounts for the overlapping quarter. Subtract this total from your share of
the taxable income for the part of the quarter included in your tax year, as
previously figured. Add the resulting amounts for the overlapping quarters
to the amounts shown on line 2c for the full quarters included in your tax
year and report it in the same manner as explained above for calendar year
taxpayers.
Line 3b. Your share of section 212 expenses for the calendar quarter.
Calendar year taxpayers and fiscal year taxpayers whose tax years end with
a calendar quarter: If you are an individual or other pass-through interest
holder (as defined in Treasury Temporary Regulations section 1.67-3T), you
must report as ordinary income the total of the amounts shown on line 3b of
Schedule Q for each quarter included in your tax year. This amount must be
reported in addition to your share of taxable income (or net loss) determined
above. Report this total on your tax return.
If you are an individual and itemize your deductions on your return, you
may be able to deduct the total as a miscellaneous itemized deduction. It
should be included with the other miscellaneous deductions that are subject
to the 2% of adjusted gross income limit.
Fiscal year taxpayers whose tax years do not end with a calendar
quarter: The same rules indicated above for calendar year taxpayers apply,
except that you must figure your share of section 212 expenses based on
your tax year. For each calendar quarter that overlaps the beginning or end
of your tax year, divide the amount shown on line 3a by the number of days
in that quarter. Multiply the result by your percentage of ownership of all
residual interests for each day of your tax year included in that quarter. Total
the daily amounts of section 212 expenses for the overlapping quarters.
Add these amounts to the amounts shown on line 3b for the full quarters
included in your tax year. Report the resulting amount in the same manner
as explained above for calendar year taxpayers.

STATE OF HAWAII — DEPARTMENT OF TAXATION

SCHEDULE Q

Quarterly Notice to Residual Interest Holder of
REMIC Taxable Income or Net Loss Allocation

(FORM N-66)
(REV. 2017)
	
	

Copy C — For
REMIC’s Records

For calendar quarter ended             , 20    
(Complete for each residual interest holder—See Instructions on back of Copy C.)

Residual interest holder’s identifying number	

REMIC’s identifying number

Residual interest holder’s name, mailing address, and Postal/ZIP code	

REMIC’s name, mailing address, and Postal/ZIP code

What type of entity is the residual interest holder? .......................................................................................
Enter residual interest holder’s percentage of ownership of all residual interests:
(i)	 Before change: ...............%
(ii)	 End of quarter: ...............%
Enter the percentage of the REMIC’s assets for the quarter represented by each of the following:
(i)	 Real estate assets under IRC section 856(c)(5)(B)  ...............%
(ii)	 Assets described in IRC section 7701(a)(19)(C) (relating to the
	
definition of a domestic building and loan association) ...............%
D	 Check applicable boxes:	 (1)  Final Schedule Q	 (2)  Amended Schedule Q
E	 Reconciliation of residual interest holder’s capital account:
A	
B	
	
	
C	
	
	

(a)
Capital account
at beginning of
quarter

(b)
Capital
contributed
during quarter

(c)
Taxable income
(net loss) from
line 1b below

(d)

(e)

Nontaxable
income

Unallowable
deductions

(	

(f)
Withdrawals
and
distributions

)	(	

(g)
Capital account
at end of quarter
(combine cols. (a)
through (f))

)

Caution: Refer to Instructions for Residual Interest Holder on back of Copy B before entering information from this schedule on your tax return.

1	a	 Taxable income (net loss) of the REMIC for the calendar quarter...............................................................
	 b	 Your share of the taxable income (net loss) for the calendar quarter.............................................................................................
2	a	 Sum of the daily accruals under IRC section 860E for all residual interests for the calendar quarter ........
	 b	 Sum of the daily accruals under IRC section 860E with respect to your interest for the calendar quarter.....................................
	 c	 Excess inclusion for the calendar quarter with respect to your residual interest (Subtract line 2b from line 1b, but do not enter
less than zero)................................................................................................................................................................................
3		 Residual interest holders who are individuals or other pass-through interest holders. (See
Instructions.) (Not required to be completed for other entities):
	 a	 IRC section 212 expenses of the REMIC for the calendar quarter..............................................................
	 b	 Your share of IRC section 212 expenses for the calendar quarter. (If you are an individual, this amount must be included in
gross income in addition to the amount shown on line 1b. See Instructions for treatment of this amount as a miscellaneous
itemized deduction if you are an individual.)...................................................................................................................................
SCHEDULE Q (FORM N-66)

Instructions for REMIC
(Section references are to the Internal Revenue Code unless otherwise
noted.)

Purpose
Schedule Q (Form N-66) shows each residual interest holder’s share of the
REMIC’s quarterly taxable income (or net loss), the excess inclusion with
respect to the residual interest holder’s interest, and the residual interest
holder’s share of the REMIC’s section 212 expenses for the quarter.
Although the REMIC is not subject to income tax, the residual interest
holders are liable for tax on their share of the REMIC’s taxable income,
whether or not distributed, and must include their share on their tax returns.

General Instructions
Complete Schedule Q (Form N-66) for each person who was a residual
interest holder at any time during the calendar quarter. File Copy A with
Form N-66. Give Copy B to the residual interest holder by the last day of the
month following the month in which the calendar quarter ends. Keep Copy
C with a copy of Form N-66 as part of the REMIC’s records.
Rounding Off to Whole-Dollar Amounts — The Department of Taxation
is requiring all business income tax filers to round off cents to the nearest
whole dollar for all dollar entries on the tax return and schedules.

Specific Instructions
On each Schedule Q, enter the names, addresses, and identifying numbers
of the residual interest holder and REMIC. For each residual interest holder
that is an individual, you must enter the residual interest holder’s social
security number (SSN). If the individual is an alien who does not have, and
is not eligible to obtain, an SSN, the alien must enter the individual taxpayer
identification number (ITIN) issued to the alien by the Internal Revenue
Service. If the individual has applied for an ITIN but the IRS has not yet
issued the ITIN, write “Applied For.” For all other residual interest holders
you must enter the residual interest holder’s federal employer identification
number. (However, if a residual interest holder is an individual retirement
arrangement (IRA), enter the identifying number of the IRA trust. Do not
enter the SSN of the individual for whom the IRA is maintained.)
Item A. What type of entity is this residual interest holder?—State on
this line whether the residual interest holder is an individual, a corporation,
an estate, a trust, a partnership, an exempt organization, a nominee
(custodian), or another REMIC. If the residual interest holder is a nominee,
use the following codes to indicate in parentheses the type of entity the
nominee represents: I - Individual; C - Corporation; F - Estate or Trust; P
- Partnership; E - Exempt Organization; R - REMIC; or IRA - Individual
Retirement Arrangement
Item B. Residual interest holder’s percentage of ownership.—Enter in
item B(ii) the percentage existing at the end of the calendar quarter. However,
if a residual interest holder’s percentage of ownership changed during the
quarter, enter in item B(i) the percentage that existed immediately before
the change. If there are multiple changes in the percentage of ownership
during the quarter, attach a statement giving the date and percentage
before each change.
Item C. REMIC assets.—Enter in Item C the percentage of the REMIC’s
assets during the calendar quarter represented by each of the following
categories of assets:
(1)	 Real estate assets under section 856(c)(5)(B); and
(2)	 Assets described in section 7701(a)(19)(C)(relating to the
definition of a domestic building and loan association).
These percentages must be computed using the average adjusted
basis of the assets held during the calendar quarter. In computing the
average adjusted basis of the assets held during each calendar quarter,
the REMIC must make the appropriate computation as of the close of
each month, week, or day and then average the monthly, weekly, or daily
percentages for the quarter. The monthly, weekly, or daily computation
period must be applied uniformly during the calendar quarter to both
categories of assets, and may not be changed in succeeding calendar

quarters without Department of Taxation’s consent. If the percentage of the
REMIC’s assets for either category is at least 95%, the REMIC may show
“95 or more” for that category in item C.
Note: If less than 95% of the assets of the REMIC are real estate assets
(as defined in section 856(c)(5)(B)), the REMIC must also report to any
real estate investment trust that holds a residual interest the information
specified in Treasury Regulations section 1.860F-4(e)(1)(ii)(B). However,
if a REMIC is an “eligible REMIC” as defined in Internal Revenue Bulletin:
2012-3, Notice 2012-5, pages 291-293, and a percentage of its assets
represented by either of the categories of assets described under REMIC
assets, earlier, was less than 95% but at least 80%, then the REMIC need
only specify in Item C that the percentage for that category was at least
80%.
Item E. Reconciliation of residual interest holder’s capital account.—
Show what caused the changes in the residual interest holders’ capital
accounts during the tax year.
The amounts shown should agree with the REMIC’s books and records and
the balance sheet amounts. Attach a statement explaining any differences.
Include in column (d) tax-exempt interest income, other tax-exempt income,
income from prohibited transactions, income recorded on the REMIC’s
books but not included on this return, and allowable deductions not charged
against book income this year.
Include in column (e) capital losses in excess of the $3,000 limitation, other
nondeductible amounts (such as losses from prohibited transactions and
expenses connected with the production of tax-exempt income), deductions
allocable to prohibited transactions, expenses recorded on books not
deducted on this return, and taxable income not recorded on books this
year.
Line 1a. Taxable income (net loss) of the REMIC for the calendar
quarter.—Enter the REMIC’s taxable income (or net loss) for the calendar
quarter. The sum of the totals for the four quarters in the calendar year must
equal the amounts shown on line 15, section I of Form N-66.
Line 1b. Your share of the taxable income (net loss) for the calendar
quarter.—Enter the residual interest holder’s share of the taxable income
(or net loss) shown on line 1a (determined by adding such holder’s daily
portions under section 860C(a)(2) for each day in the quarter such holder
held the residual interest). If line 1a is a loss, enter the residual interest
holder’s full share of the loss, without regard to the adjusted basis of the
residual holder’s interest in the REMIC.
Line 2a. Sum of the daily accruals under section 860E for all residual
interests for the calendar quarter.—Enter the product of the sum of
the adjusted issue prices of all residual interests at the beginning of the
quarter and 120% of the long-term Federal rate (determined on the basis
of compounding at the end of each quarter and properly adjusted for the
length of such quarter). See section 860E(c) for details.
Line 2b. Sum of the daily accruals under section 860E with respect to
your interest.—Enter zero if line 2a is zero. Otherwise, divide the amount
shown on line 2a by the number of days in the quarter. Multiply the result
by the residual interest holder’s percentage of ownership for each day in the
quarter that the residual interest holder owned the interest. Total the daily
amounts and enter the result.
Line 3. Complete lines 3a and 3b only for residual interest holders
who are individuals or other pass-through interest holders (as defined
in Treasury Temporary Regulations section 1.67-3T).
Line 3a. Section 212 expenses of the REMIC for the calendar quarter.—
Enter the REMIC’s allocable section 212 expenses for the calendar quarter.
The term “allocable section 212 expenses” means the aggregate amount of
the expenses paid or accrued in the calendar quarter for which a deduction
is allowable under section 212 in determining the taxable income of the
REMIC for the calendar quarter.
Section 212 expenses generally include operational expenses such
as rent, salaries, legal and accounting fees, the cost of preparing and
distributing reports and notices to interest holders, and litigation expenses.
Line 3b. Your share of section 212 expenses for the calendar quarter.—
Enter the residual interest holder’s share of the amount shown on line 3a.