100 STAT. 2312
PUBLIC LAW 99-514—OCT. 22, 1986 for any taxable year shall in no event be less than the excess inclusion for such taxable year. "(2) EXCEPTION FOR CERTAIN FINANCIAL INSTITUTIONS.—Para-
graph (1) shall not apply to any organization to which section 593 applies. The Secretary may by regulations provide vhat the preceding sentence shall not apply where necessary or appropriate to prevent avoidance of tax imposed by this chapter. "(b) ORGANIZATIONS SUBJECT TO UNRELATED BUSINESS TAX.—If the
holder of any residual interest in a REMIC is an organization subject to the tax imposed by section 511, the excess inclusion of such holder for any taxable year shall be treated as unrelated business taxable income of such holder for purposes of section 511. "(c) EXCESS INCLUSION.—For purposes of this section— "(1) IN GENERAL.—The term 'excess inclusion' means, with respect to any residual interest in a REMIC for any calendar quarter, the excess (if any) of— "(A) the amount taken into account with respect to such interest by the holder under section 860C(a), over "(B) the sum of the daily accruals with respect to such interest for days during such calendar quarter while held by such holder. To the extent provided in regulations, if residual interests in a REMIC do not have significant value, the excess inclusions with respect to such interests shall be the amount determined under subparagraph (A) without regard to subparagraph (B). "(2) DETERMINATION OF DAILY ACCRUALS.—
"(A) IN GENERAL.—For purposes of this subsection, the daily accrual with respect to any residual interest for any day in any calendar quarter shall be determined by allocating to each day in such quarter its ratable portion of the product of— "(i) the adjusted issue price of such interest at the beginning of such quarter, and "(ii) 120 percent of the long-term Federal rate (determined on the basis of compounding at the close of each calendar quarter and properly adjusted for the length of such quarter). "(B) ADJUSTED ISSUE PRICE.—For purposes of this paragraph, the adjusted issue price of any residual interest at the beginning of any calendar quarter is the issue price of residual interest— "(i) increased by the amount of daily accruals for prior quarters, and "(ii) decreased by any distribution made with respect to such interest before the beginning of such quarter. "(C) FEDERAL LONG-TERM RATE.—For purposes of this paragraph, the term 'Federal long-term rate' means the Federal long-term rate which would have applied to the residual interest under section 1274(d) (determined without regard to paragraph (2) thereof) if it were a debt instrument. "(d) TREATMENT OF RESIDUAL INTERESTS HELD BY REAL ESTATE INVESTMENT TRUSTS.—If a residual interest in a REMIC is held by a
real estate investment trust, under regulations prescribed by the Secretary— "(1) any excess of— . ^
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