26 C.F.R. § 1.671-5T Reporting for widely held fixed investment trusts (temporary).
Title 26 - Internal Revenue
(a) Through (b)(4) [Reserved]. For further guidance, see §1.671–5(a) through (b)(4). (5) The cash held for distribution is the cash held by the WHFIT (other than trust sales proceeds and proceeds from sales described in paragraph (c)(2)(iv)(G) of this section) less reasonably required reserve funds as of the date that the amount of a distribution is required to be determined under the WHFIT's governing document. (b)(6) and (b)(7) [Reserved]. For further guidance, see §1.671–5(b)(6) and (b)(7). (8) An in-kind redemption is a redemption in which a beneficial owner receives a pro-rata share of each of the assets of the WHFIT that the beneficial owner is deemed to own under section 671. For example, for purposes of this paragraph (b)(8), if beneficial owner A owns a one percent interest in a WHFIT that holds 100 shares of X corporation stock, so that A is considered to own a one percent interest in each of the 100 shares, A's pro-rata share of the X corporation stock for this purpose is one share of X corporation stock. (b)(9) through (b)(20) [Reserved]. For further guidance, see §1.671–5(b)(9) through (b)(20). (21) Trust sales proceeds equal the amount paid to a WHFIT for the sale or disposition of an asset held by the WHFIT, including principal payments received by the WHFIT that completely retire a debt instrument (other than a final scheduled principal payment) and pro-rata partial principal prepayments described under §1.1275–2(f)(2). Trust sales proceeds do not include amounts paid for any interest income that would be required to be reported under §1.6045–1(d)(3). Trust sales proceeds also do not include amounts paid to a NMWHFIT as the result of a pro-rata sales of trust assets to effect a redemption described in paragraph (c)(2)(iv)(G) of this section. (b)(22) through (c)(2)(iii) [Reserved]. For further guidance, see §1.671–5(b)(22) through (c)(2)(iii). (iv) Asset sales and dispositions. The trustee must report information regarding sales and dispositions of WHFIT assets as required in this paragraph (c)(2)(iv). For purposes of this paragraph (c)(2)(iv), a payment (other than a final scheduled payment) that completely retires a debt instrument (including a mortgage held by a WHMT) or a pro-rata prepayment on a debt instrument (see §1.1275–2(f)(2)) held by a WHFIT must be reported as a full or partial sale or disposition of the debt instrument. A pro-rata sale of a trust asset to effect a redemption, as defined in paragraph (c)(2)(iv)(G) of this section, is not reported as a sale or disposition under this paragraph (c)(2)(iv). (A) General rule. Except as provided in paragraph (c)(2)(iv)(B) of this section (regarding the exception for certain NMWHFITs) or paragraph (c)(2)(iv)(C) (regarding the exception for certain WHMTs) of this section, the trustee must report with respect to each sale or disposition of a WHFIT asset— (1) The date of each sale or disposition; (2) Information that enables a requesting person to determine the amount of trust sales proceeds (as defined in paragraph (b)(21) of this section) attributable to a beneficial owner as a result of each sale or disposition; and (3) Information that enables a beneficial owner to allocate, with reasonable accuracy, a portion of the owner's basis in its trust interest to each sale or disposition. (B) Exception for certain NMWHFITs. If a NMWHFIT meets either the general WHFIT de minimis test of paragraph (c)(2)(iv)(D)(1) of this section for a calendar year, the qualified NMWHFIT exception of paragraph (c)(2)(iv)(E) of this section, or the NMWHFIT final calendar year exception of paragraph (c)(2)(iv)(F) of this section, the trustee is not required to report under paragraph (c)(2)(iv)(A) of this section. Instead, the trustee must report sufficient information to enable a requesting person to determine the amount of trust sales proceeds distributed to a beneficial owner during the calendar year with respect to each sale or disposition of a trust asset. The trustee also must provide requesting persons with a statement that the NMWHFIT is permitted to report under this paragraph (c)(2)(iv)(B). (C) Exception for certain WHMTs. If a WHMT meets either of the de minimis tests of paragraph (c)(2)(iv)(D) of this section for the calendar year, the trustee is not required to report under paragraph (c)(2)(iv)(A) of this section. Instead, the trustee must report information to enable a requesting person to determine the amount of trust sales proceeds attributable to a beneficial owner as a result of the sale or disposition. The trustee also must provide requesting persons with a statement that the WHMT is permitted to report under this paragraph (c)(2)(iv)(C). (D) De minimis tests—(1) General WHFIT de minimis test. The general WHFIT de minimis test applies to a NMWHFIT or to a WHMT that does not meet the requirements for the special WHMT test in paragraph (c)(2)(iv)(D)(2) of this section. The general WHFIT de minimis test is satisfied if trust sales proceeds for the calendar year are not more than five percent of the net asset value of the trust (aggregate fair market value of the trust's assets less the trust's liabilities) as of the later of January 1 of that year or the trust's start-up date (as defined in §1.671–5(b)(19)). (2) Special WHMT de minimis test. A WHMT that meets the asset requirement of §1.671–5(g)(1)(ii)(E) satisfies the special WHMT de minimis test in this paragraph (c)(2)(iv)(D)(2) if trust sales proceeds for the calendar year are not more than five percent of the aggregate outstanding principal balance of the WHMT (as defined in §1.671–5(g)(1)(iii)(D)) as of the later of January 1 of that year or the trust's start-up date. For purposes of applying the special WHMT de minimis test in this paragraph (c)(2)(iv)(D)(2), amounts that result from the complete or partial payment of the outstanding principal balance of the mortgages held by the trust are not included in the amount of trust sales proceeds. (3) Effect of clean-up call. If a WHFIT fails to meet either de minimis test described in this paragraph (c)(2)(iv)(D) solely as the result of a clean-up call, as defined in §1.671–5(b)(6), the WHFIT will be treated as having met the de minimis test. (E) Qualified NMWHFIT exception. The qualified NMWHFIT exception is satisfied if the calendar year for which the trustee is reporting begins before January 1, 2011 and— (1) The NMWHFIT has a start-up date (as defined in §1.671–5(b)(19)) before February 23, 2006; (2) The registration statement of the NMWHFIT becomes effective under the Securities Act of 1933, as amended (15 U.S.C. 77a, et seq.) and trust interests are offered for sale to the public before February 23, 2006; or (3) The registration statement of the NMWHFIT become effective under the Securities Act of 1933 and trust interests are offered for sale to the public on or after February 23, 2006, and before July 31, 2006, and the NMWHFIT is fully funded before October 1, 2006. (F) NMWHFIT final calendar year exception. The NMWHFIT final calendar year exception is satisfied if— (1) The NMWHFIT terminates on or before December 31 of the year for which the trustee is reporting; (2) A trust interest holder may not roll-over its investment in the NMWHFIT to another WHFIT; and (3) The trustee makes reasonable efforts to engage in pro-rata sales of trust assets to effect redemptions. (G) Pro-rata sales of trust assets to effect a redemption—(1) Definition. A pro-rata sale of a trust asset to effect a redemption is not required to be reported under this paragraph (c)(2)(iv). A pro-rata sale of a trust asset to effect a redemption occurs when a— (i) A trust interest holder tenders one or more trust interests for redemption; (ii) The trustee sells the pro-rata share of the trust asset that is deemed to be owned by the trust interest holder under section 671 as a result of the trust interest holder's ownership of the trust interest or interests tendered for redemption (See paragraph (b)(8) of this section for a description of how pro-rata is to be applied for purposes of this paragraph (c)(2)(iv)(G)); (iii) The trustee engages in the sale solely to obtain cash that is immediately distributed to the redeeming trust interest holder as a result of the redemption; and (iv) The redemption is reported as required under §1.671–5(c)(2)(v) by the trustee. (2) Example. The following example illustrates the definition of a pro-rata sale of a trust asset to effect a redemption: Example: Trust has two hundred trust interests and all interests have equal value and rights. Trust owns two hundred shares of stock in corporation X, two hundred shares of stock in corporation Y, and one hundred shares of stock in corporation Z. C owns one trust interest and tenders it for redemption. To obtain cash for the redemption, the trustee of Trust sells one share of each of the X and Y stock and one share of Z stock. Trustee immediately distributes the proceeds from the sale of the X and the Y stock, as well as 50% of the proceeds from the sale of the Z stock to C as redemption proceeds. Trustee will report the redemption under §1.671–5(c)(2)(v). The sale of the share of X stock and the sale of the share of Y stock are each a pro-rata sale of a trust asset to effect a redemption and are not required to be reported under this paragraph (c)(2)(iv)(G). The proceeds from the sale of the X stock and the Y stock are not trust sales proceeds under paragraph (b)(21) of this section and are not included for the purpose of determining whether Trust meets the de minimis test. The sale of the Z stock, because it was not a sale of the pro-rata share of the trust asset that is treated as owned by C is not a pro-rata sale of a trust asset to effect a redemption and is required to be reported as provided under paragraph (c)(2)(iv)(A) or (B) of this section, whichever is applicable. The proceeds from the sale of the Z stock are trust sales proceeds under paragraph (b)(21) of this section and included for the purpose of determining whether Trust meets the de minimis test in paragraph (c)(2)(iv)(D)(1) of this section. (c)(2)(v)(A) and (B) [Reserved]. For further guidance, see §1.671–5(c)(2)(v)(A) and (B). (C) Exception for certain NMWHFITs with dividend income—(1) In general. The trustee of a NMWHFIT described in paragraph (c)(2)(v)(C)(2) of this section is not required to report the information described in §1.671–5(c)(2)(v)(A) (regarding redemptions) or (c)(2)(v)(B) (regarding sales). However, the trustee must report to requesting persons, for each date on which the amount of redemption proceeds to be paid for the redemption of a trust interest is determined, information that will enable requesting persons to determine the redemption proceeds per trust interest on that date. The trustee also must provide requesting persons with a statement that this paragraph applies to the NMWHFIT. (2) NMWHFITs that qualify for the exception. This paragraph (c)(2)(v)(C) applies to a NMWHFIT if substantially all the income of the NMWHFIT consists of dividends (as defined in section 6042(b) and the regulations thereunder) and the NMWHFIT satisfies either paragraph (c)(2)(v)(C)(2)(i) or (ii) of this section. Trust sales proceeds and gross proceeds from a sale described in paragraph (c)(2)(iv)(G) of this section are ignored for the purpose of determining if substantially all of a NMWHFIT's income consists of dividends. (i) The trustee is required by the governing document of the NMWHFIT to determine and distribute all cash held for distribution (as defined in paragraph (b)(5) of this section) no less frequently than monthly. A NMWHFIT will be considered to have satisfied this paragraph (c)(2)(v)(C)(2)(i) notwithstanding that the governing document of the NMWHFIT permits the trustee to forego making a required monthly or more frequent distribution, if the cash held for distribution is less than 0.1% of the aggregate net asset value of the trust as of the date specified in the governing document for calculating the amount of the monthly distribution. (ii) The qualified NMWHFIT exception of paragraph (c)(2)(iv)(E) of this section is satisfied. (vi) Information regarding bond premium. The trustee generally must report information that enables a beneficial owner to determine, in any manner that is reasonably consistent with section 171, the amount of the beneficial owner's amortizable bond premium, if any, for each calendar year. However, if a NMWHFIT meets the general de minimis test of paragraph (c)(2)(iv)(D)(1) of this section, the qualified NMWHFIT exception of paragraph (c)(2)(iv)(E) of this section, or the NMWHFIT final calendar year exception of paragraph (c)(2)(iv)(F) of this section, the trustee of such NMWHFIT is not required to report information regarding bond premium. (vii) Information regarding market discount. The trustee generally must report information that enables a beneficial owner to determine, in any manner reasonably consistent with section 1276 (including section 1276(a)(3)), the amount of market discount that has accrued during the calendar year. However, if a NMWHFIT meets the general de minimis test of paragraph (c)(2)(iv)(D)(1) of this section, the qualified NMWHFIT exception of paragraph (c)(2)(iv)(E) of this section, NMWHFIT final calendar year exception of paragraph (c)(2)(iv)(F) of this section, the trustee of such NMWHFIT is not required to provide information regarding market discount. (c)(3) through (f)(1)(i) [Reserved] For further guidance, see §1.671–5(c)(3) through (e)(4). (f) Safe harbor for providing information for certain NMWHFITs—(1) Safe harbor for trustee reporting of NMWHFIT information. The trustee of a NMWHFIT that meets the requirements of paragraph (f)(1)(i) of this section is deemed to satisfy paragraph (c)(1)(i) of this section, if the trustee calculates and provides WHFIT information in the manner described in this paragraph (f) and provides a statement to a requesting person giving notice that information has been calculated in accordance with this paragraph (f)(1). (i) In general—(A) Eligibility to report under this safe harbor. Only NMWHFITs that meet the requirements set forth in paragraphs (f)(1)(i)(A)(1) and (2) of this section may report under this safe harbor. For purposes of determining whether paragraph (f)(1)(i)(A)(1) of this section is met, trust sales proceeds and gross proceeds from sales described in paragraph (c)(2)(iv)(G) of this section are ignored: (1) Substantially all of the NMWHFIT's income is from dividends or interest; and (2) All trust interests have identical value and rights. (f)(1)(i)(B) through (f)(vii) [Reserved]. For further guidance, see §1.671–5(f)(1)(i)(B) through (f)(vii). (viii) Reporting market discount information under the safe harbor—(A) In general. If the trustee of a NMWHFIT is required to provide information regarding market discount under paragraph (c)(2)(vii) of this section, the trustee must provide the information required under §1.671–5(f)(1)(iv)(A)(1)(iii) of this section. If the trustee is not required to provide market discount information under paragraph (c)(2)(vii) of this section (because paragraph (c)(2)(iv) of this section applies to the NMWHFIT), the trustee is not required under this paragraph (f) to provide any information regarding market discount. (f)(1)(viii)(B) through (m) [Reserved] For further guidance, see §1.671–5(f)(1)(viii)(B) through (m). [T.D. 9279, 71 FR 43971, Aug. 3, 2006]
Title 26: Internal Revenue
PART 1—INCOME TAXES
grantors and others treated as substantial owners
§ 1.671-5T Reporting for widely held fixed investment trusts (temporary).
