[Federal Register Volume 71, Number 15 (Tuesday, January 24, 2006)]
[Rules and Regulations]
[Pages 4002-4025]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-396]



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Part III





Department of the Treasury





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Internal Revenue Service



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26 CFR Parts 1, 301, and 602



Reporting for Widely Held Fixed Investment Trusts; Final Rule

  Federal Register / Vol. 71, No. 15 / Tuesday, January 24, 2006 / 
Rules and Regulations  

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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1, 301, and 602

[TD 9241]
RIN 1545-BA83


Reporting for Widely Held Fixed Investment Trusts

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final regulations that define widely 
held fixed investment trusts, clarify the reporting obligations of the 
trustees and the middlemen connected with these trusts, and provide for 
communication of tax information to beneficial owners of trust 
interests. The regulations will affect trustees of, and middlemen 
holding interests on behalf of beneficial owners of trust interests 
with respect to, widely held fixed investment trusts.

DATES: Effective Date: These regulations are effective January 24, 
2006.
    Applicability Date: For dates of applicability of these 
regulations, see Sec.  1.671-5(m).

FOR FURTHER INFORMATION CONTACT: Faith Colson, (202) 622-3060 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collection of information contained in these final regulations 
has been previously reviewed and approved by the Office of Management 
and Budget in accordance with the Paperwork Reduction Act (44 U.S.C. 
3507) under control number 1545-1540. Response to this collection of 
information is mandatory.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a valid 
control number assigned by the Office of Management and Budget.
    The estimated annual burden per recordkeeper varies from 1 to 4 
hours, depending on individual circumstances, with an estimated average 
of 2 hours. Comments concerning the accuracy of this burden estimate 
and suggestions for reducing this burden should be sent to the Internal 
Revenue Service, Attn: IRS Reports Clearance Officer, 
SE:W:CAR:MP:T:T:SP, Washington DC 20224, and to the Office of 
Management and Budget, Attn: Desk Officer for the Department of 
Treasury, Office of Information and Regulatory Affairs, Washington, DC 
20503.
    Books or records relating to a collection of information must be 
retained as long as their contents might become material in the 
administration of any internal revenue law. Generally, tax returns and 
tax return information are confidential, as required by 26 U.S.C. 6103.

Background

    This document contains amendments to 26 CFR parts 1, 301 and 602. 
On June 20, 2002, the Internal Revenue Service (IRS) and the Treasury 
Department withdrew proposed regulations (REG-209813-96) relating to 
the reporting requirements for widely held fixed investment trusts 
(WHFITs) previously published in the Federal Register (63 FR 43354) on 
August 13, 1998 (1998 Proposed Regulations) and published a new notice 
of proposed rulemaking (REG-106871-00) in the Federal Register (67 FR 
41892) on June 20, 2002 (Reproposed Regulations). No public hearing was 
requested or held with respect to the Reproposed Regulations. Comments 
responding to the Reproposed Regulations were received. After 
consideration of the comments, the Reproposed Regulations, with certain 
revisions, are adopted as final regulations by this Treasury decision.
    Section 301.7701-4(c) of the Procedure and Administration 
Regulations provides grantor trust treatment to an investment trust 
with a single class of ownership interests, representing undivided 
beneficial interests in the assets of the trust, if there is no power 
to vary the investment of the owners (a fixed investment trust). An 
investment trust with multiple classes of ownership interests, in which 
there is no power to vary the investment of the owners will also be 
treated as a grantor trust, if the trust is formed to facilitate direct 
investment in the assets of the trust and the existence of multiple 
classes is incidental to that purpose. Beneficial owners of trust 
interests are treated as grantors. See Sec.  301.7701-4(c); see also 
Rev. Rul. 84-10, (1984-1 C.B. 155); Rev. Rul. 61-175, (1961-2 C.B. 
128).
    Trustees of fixed investment trusts frequently do not know the 
identities of the beneficial owners of the trust interests and are 
unable to communicate tax information directly to them because trust 
interests often are held in street name, i.e., in the name of a 
middleman. The reproposed and final regulations provide rules that 
specifically require the sharing of tax information among trustees, 
middlemen, and beneficial owners of fixed investment trusts that meet 
the definition of a widely held fixed investment trust (WHFIT). (See 
section IA below.)
    In general, the final regulations retain the structure of the 
Reproposed Regulations. Paragraph (c) of the reproposed and final 
regulations provides general reporting requirements for trustees to 
provide information to requesting persons, which include: (1) 
Middlemen, (2) beneficial owners who are brokers, (3) exempt recipients 
who hold their trust interests directly (and not through a middleman), 
(4) noncalendar-year beneficial owners who hold their trust interests 
directly, and (5) a representative or agent of any of the above. 
Paragraphs (d) and (e) of the reproposed and final regulations describe 
the responsibility of trustees and middlemen for information reporting 
to the IRS and beneficial owners. Paragraphs (f) and (g) of the 
reproposed and final regulations provide reporting safe harbors.

Explanation of Revisions to Reproposed Regulations and Summary of 
Comments

I. Definitions

A. Definition of a Widely Held Fixed Investment Trust and 
Classification as a Widely Held Mortgage Trust or a Non-Mortgage Widely 
Held Fixed Investment Trust

    The Reproposed Regulations define a WHFIT as an arrangement 
classified as a trust under Sec.  301.7701-4(c) in which at least one 
interest is held by a middleman, provided that the trust is classified 
as a United States person under section 7701(a)(30)(E). The final 
regulations retain this definition.
    The Reproposed Regulations introduced the term widely held mortgage 
trust (WHMT) to describe a WHFIT, the assets of which are mortgages, 
amounts received on mortgages, and reasonably required reserve funds, 
as measured by value. The final regulations expand the definition of a 
WHMT, to provide that a WHFIT is also a WHMT if substantially all its 
assets also include trust interests in one or more WHMTs and regular 
interests in one or more real estate mortgage investment conduits 
(REMICs).
    The final regulations also introduce a new term, non-mortgage 
widely held fixed investment trust (NMWHFIT), to clarify and 
distinguish the requirements and reporting safe-harbor for WHMTs from 
the requirements and reporting safe harbor applicable to other WHFITS. 
A NMWHFIT is any WHFIT that is not a WHMT.

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B. Definition of a Mortgage

    The Reproposed Regulations provide a reporting safe harbor for 
WHMTs that directly hold interests in mortgages; the safe harbor is not 
available to tiered arrangements. The IRS and the Treasury Department, 
after considering the comments received with respect to the Reproposed 
Regulations, have determined that the definition of a mortgage should 
be clarified in the final regulations to provide that an interest in a 
WHMT is not a mortgage under the regulations. Accordingly, the final 
regulations define a mortgage as an obligation that is principally 
secured by an interest in real property within the meaning of Sec.  
1.860G-2(a)(5) of the Income Tax Regulations, except that a mortgage 
does not include an interest in another WHMT or an interest in a 
mortgage held by another WHMT. The principal effect of this change is 
to clarify that, although a WHFIT investing in another WHMT is 
classified as a WHMT and is subject to the general reporting provisions 
that apply only to WHMTs, it is not eligible for the WHMT safe harbor 
reporting rules for the reasons discussed in section VI(B) below.

C. Definition of Trust Interest Holders, Beneficial Owners and 
Middleman

    Under the Reproposed Regulations, a unit interest holder is defined 
as any person who holds a direct or indirect interest in a WHFIT at any 
time during the calendar year. The final regulations replace the term 
unit interest holder with two new terms: Trust interest holder (TIH) 
and beneficial owner. A TIH is any person who holds a direct or 
indirect interest in a WHFIT at any time during the calendar year. A 
beneficial owner is a TIH who holds a beneficial interest in a WHFIT. 
As in the Reproposed Regulations, in the final regulations, the term 
middleman refers to a TIH that holds a trust interest on behalf of, or 
for the account of, another person, or who otherwise acts in a capacity 
as an intermediary for the account of another person.

D. Definition of Item

    The Reproposed Regulations use the term item without defining that 
term. Item as used in the final regulations refers broadly to an item 
of income, expense, or credit as well as any trust event (for example, 
the sale of an asset) or any characteristic or attribute of the above 
that affects the income, deductions, or credits reported by a 
beneficial owner in any taxable year that the beneficial owner holds a 
trust interest. Item also may refer to an individual item or to a group 
of items depending on whether the item must be reported individually 
under Sec.  1.671-5(c)(1)(i) and (e)(1).

E. Definition of Start-Up Date

    The Reproposed Regulations define the start-up date of a WHFIT as 
the date on which substantially all of the assets and the contracts for 
the purchase of assets are deposited with the trustee of the WHFIT. The 
Reproposed Regulations also define an asset to include an interest in a 
contract. Because the definition of an asset includes an interest in a 
contract, the definition of the start-up date in the Reproposed 
Regulations is revised in the final regulations to provide that the 
start-up date is the date on which substantially all of the assets are 
deposited with the trustee.

II. General Reporting and Record Retention Obligations

A. Requirement That the Trustee Provide Trust Information on a Calendar 
Year Basis

    In general, the reproposed and final regulations require the 
trustee to provide information regarding the WHFIT to requesting 
persons. The Reproposed Regulations provide that the trustee could 
choose either a calendar month, calendar quarter, or half or full 
calendar year reporting period, provided that the information furnished 
by the trustee under the chosen reporting period allowed the recipient 
to determine the WHFIT items attributable to a particular beneficial 
owner with reasonable accuracy, regardless of the owner's taxable year 
or the period of time during the calendar year that the owner held the 
unit interest.
    One commentator was concerned that if a trustee choose a reporting 
period shorter than a full calendar year, the trustee might also report 
trust information to middlemen more than once a year and because of 
this, middlemen would be required to process WHFIT information more 
than once a year. Another commentator was concerned that, if a trustee 
chose a reporting period shorter than a calendar year, the trustee 
could be required to report trust information more than once a year.
    In response to these comments, the final regulations provide that, 
regardless of the period chosen by the trustee for calculating trust 
information, the trustee must provide the information required under 
these regulations on a calendar year basis. The trustee, of course, may 
provide additional trust information to requesting persons throughout 
the calendar year at the trustee's discretion. For example, if a 
trustee uses a monthly calculation period, the trustee must provide a 
single statement to requesting persons at the end of the year that 
contains the information required to be reported under these 
regulations for each month of the calendar year. In addition to the 
calendar year statement, the trustee may, but is not required to, 
provide additional statements to requesting persons during the calendar 
year.
    To further clarify that a trustee may choose the period for 
calculating the information required to be reported under these 
regulations, but in all events must report that information to 
requesting persons on a calendar year basis, the final regulations 
refer to the period chosen by the trustee for calculating trust 
information as the calculation period rather than the reporting period.

B. Trustee's Burden To Retain Information and Supplemental Data

    The Reproposed Regulations provide that, throughout the duration of 
the trust and for a period of five years following the termination of 
the trust, a trustee must retain: (1) A copy of the information 
required to be provided to requesting persons each year; and (2) any 
supplemental data necessary to establish that the information provided 
to requesting persons is correct and meets the requirements of 
paragraph (c) (supplemental data).
    One commentator noted that some WHFITs, particularly WHMTs, may be 
in existence for up to 30 years and that the requirement in the 
Reproposed Regulations for a trustee to maintain the WHFIT's records 
for up to 35 years is overly burdensome. The commentator acknowledged 
that the IRS and investors may need to obtain WHFIT information from 
the trustee before the limitations period applicable to a beneficial 
owner's taxable year expires and suggested that the final regulations 
provide that a trustee only be required to retain information for a 
certain period after the close of the calendar year to which the 
information relates.
    The IRS and the Treasury Department adopt this suggestion with 
respect to supplemental data. However, information with respect to each 
calendar year of the WHFIT may be required by the IRS and by beneficial 
owners in order to determine tax items of a beneficial owner (for 
example, market discount or basis) for the entire life of the WHFIT and 
for several years after its termination. For this reason, the final 
regulations continue to require the

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trustee to retain a copy of the information required to be provided to 
requesting persons for the duration of the WHFIT and for at least five 
years after its termination. The IRS and the Treasury Department 
believe that this requirement is not overly burdensome because this 
information can be maintained electronically. The final regulations 
modify the requirement with respect to supplemental data by providing 
that trustees need only retain supplemental data for five years after 
the close of the calendar year to which the supplemental data relates.

C. Manner in Which WHFIT Information Is To Be Provided

    The Reproposed Regulations provide that WHFIT information may be 
provided in any manner that enables a requesting person to determine, 
with reasonable accuracy, the WHFIT items that are attributable to a 
beneficial owner for the taxable year of that beneficial owner. The 
Reproposed Regulations further require that this information be 
furnished in a format that generally conforms to industry practice for 
the reporting of a particular item of income, deduction, or credit for 
the type of asset or assets held by the WHFIT.
    One commentator suggested that, if the trustee is not providing 
trust information under a safe harbor, information could be shared more 
accurately and processed more efficiently if trustees were required to 
calculate and provide trust information on the basis of trust 
interests. The IRS and the Treasury Department do not agree that 
calculating and providing trust information on a per trust interest 
basis is always the best method for conveying information with respect 
to trust items that are not reported under the safe harbors. The 
requirement that the trustee provide information consistent with 
industry practice is intended to ensure that trustees provide WHFIT 
information in a format that can be processed by the systems used by 
the majority of middlemen. Accordingly, the final regulations do not 
adopt the suggestion.
    One commentator also suggested that middlemen be permitted to 
furnish beneficial owners with information calculated on a trust 
interest basis rather than the amount of the item that is attributable 
to the beneficial owner. The final regulations permit a middleman or a 
trustee to furnish information calculated on a trust interest basis to 
a beneficial owner with respect to a trust item, if: (1) The amount of 
the item is not required to be provided to the IRS on an information 
return; and (2) the trustee calculates and provides information on the 
basis of a trust interest with respect to that trust item under 
paragraph (c) of the regulations.

D. Elimination of Separate General Reporting Rules for WHMTs

    The Reproposed Regulations include separate reporting requirements 
for trustees and middlemen of WHMTs and trustees and middlemen of 
WHFITs other than WHMTs (i.e., non-mortgage widely-held fixed 
investment trusts or NMWHFITs as defined in these final regulations), 
with respect to market discount, bond premium, and principal payments. 
The final regulations include general reporting requirements with 
respect to market discount, bond premium, and non pro-rata partial 
principal payment information that apply to all WHFITs. As under the 
Reproposed Regulations, the final regulations require WHMTs to provide 
market discount, bond premium, and non pro-rata partial principal 
payment information regardless of whether the WHMT meets one of the de 
minimis tests described in section III of the Preamble. Under the final 
regulations, however, NMWHFITs that meet the general de minimis test or 
the qualified NMWHFIT exception (also described in section III of the 
Preamble) are not required to provide information regarding bond 
premium and market discount.

E. Requirement That a Trustee Identify a Representative of the WHFIT 
and Identify the WHMT or as a NMWHFIT

    The Reproposed Regulations require a trustee of a WHFIT to provide 
the name, address and telephone number of the WHFIT representative in a 
publication widely available to middlemen, in the trust's prospectus, 
or at the trustee's Internet website. The final regulations retain this 
requirement. Further, if the trustee provides trust information at an 
Internet website, the final regulations also require trustees, in 
addition to providing information regarding the WHFIT representative, 
to provide the address of the Internet website at which the trustee 
provides WHFIT information.
    Two commentators were concerned that middlemen would not be able to 
identify a client's investment as an investment in a WHFIT and 
suggested that the IRS publish a directory or list of WHFITs that would 
include the name and CUSIP number of each WHFIT, along with the name, 
address and telephone number of the WHFIT's representative. 
Commentators noted that a publicly available directory or list would 
assist middlemen and brokers in identifying investment trusts as WHFITs 
and in locating the WHFIT's representatives.
    In response to these comments, the final regulations require a 
trustee to identify the WHFIT as either a WHMT or a NMWHFIT when 
identifying the trust representative. Further, the IRS and the Treasury 
Department are studying whether a directory or list of WHFITs can be 
compiled by the IRS. The IRS and Treasury Department are concerned that 
such a directory is not currently feasible because of the large number 
of WHMTs. However, the IRS and Treasury request additional comments 
from middlemen regarding the type of WHFITs that should be included in 
any directory, the type of information needed by middlemen (especially, 
middlemen holding WHMT interests), and the format of a directory that 
would be most helpful. The IRS and Treasury Department also request 
comments from trustees regarding how the IRS could obtain the trust 
information needed for the directory from the trustees in the least 
burdensome manner for taxpayers as well as the Government.

III. Reporting of Asset Sales and Dispositions

A. General Information Reporting Requirements

    Under the Reproposed Regulations, the trustee is required to 
provide information that would enable a requesting person to calculate 
the amount of trust sales proceeds attributable to a beneficial owner 
with respect to each sale or disposition of an asset by the trust. In 
addition, consistent with grantor trust treatment, unless a WHFIT meets 
the ``de minimis test,'' (discussed in III(B) of this Preamble), the 
trustee is required under the Reproposed Regulations to provide 
information that would enable a beneficial owner to allocate with 
reasonable accuracy a portion of its basis in its trust interest and to 
allocate a portion of its market discount or bond premium, if any, to 
each sale or disposition of an asset by the trust. The final 
regulations retain these general information reporting requirements for 
asset sales and dispositions. Although the requirements to provide 
market discount and bond premium information (discussed in section 
II(D) of this Preamble), are the same as those in the Reproposed 
Regulations, in the final regulations, for purposes of clarity, these 
requirements are provided separately from the requirement to provide 
information with respect to

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sales and dispositions of assets by the trust.
    The final regulations retain the exception from the general 
information reporting requirements for WHFITs that meet the general de 
minimis test. In addition, the final regulations provide an exception 
for WHMTs that meet a special de minimis test for WHMTs that directly 
hold interests in mortgages (the WHMT de minimis test is discussed in 
section III(E) of this Preamble). The final regulations also provide an 
exception from the general information reporting requirements for 
NMWHFITs that meet the qualified NMWHFIT exception, which is applicable 
only to NMWHFITs with a start up date that is on or before February 23, 
2006.

B. Simplified Reporting for WHFITs That Meet the General WHFIT de 
minimis Test

    For WHFITs that meet a de minimis test, the Reproposed Regulations 
substantially simplified reporting with respect to the sale or 
disposition of a trust asset from that required under the 1998 Proposed 
Regulations. These simplified rules balanced current industry practice 
with the need for beneficial owners to accurately report the tax 
consequences of ownership of a trust interest. Under the Reproposed 
Regulations, the WHFIT de minimis test is satisfied for the calendar 
year if the aggregate amount of trust sales proceeds for that calendar 
year is not more than five percent of the fair market value of the 
assets of the trust as of January 1 of that year (the general WHFIT de 
minimis test). The Reproposed Regulations define trust sales proceeds 
as the gross proceeds received by the WHFIT with respect to a sale or 
disposition of an asset by the WHFIT.
    Under the Reproposed Regulations, if the trust meets the general 
WHFIT de minimis test, the trustee is excepted from the requirement to 
report information regarding basis, market discount and bond premium. 
The IRS and Treasury Department recognize that this method of reporting 
will likely result in some deferral of both gain and loss for 
investors, but have determined that, in cases where the WHFIT has de 
minimis sales and dispositions, the level of deferral is acceptable 
given the costs of fully accurate reporting of sales and dispositions. 
The final regulations retain this exception from the general 
requirement to provide basis, market discount and bond premium 
information for WHFITs that meet the general de minimis test.

C. Extension of Simplified Reporting to NMWHFITs That Meet the 
Qualified NMWHFIT Exception

    Several commentators requested that the final regulations except 
WHFITs having a start-up date prior to the date of publication of these 
final regulations from the requirement to report basis, market 
discount, and bond premium information with respect to sales and 
dispositions. These commentators also requested that trustees and 
middlemen be permitted to report information regarding distributed 
trust sales proceeds rather than attributable trust sales proceeds.
    To accommodate the industry's concerns regarding existing NMWHFITs, 
the final regulations add an exception for qualified NMWHFITs (the 
qualified NMWHFIT exception). The qualified NMWHFIT exception is met if 
a NMWHFIT has a start-up date that is on or before February 23, 2006 
and the calendar year for which the trustee is reporting begins before 
January 1, 2011. NMWHFITs that meet the qualified NMWHFIT exception are 
excepted from the requirement that trustees and middlemen provide 
information regarding basis, market discount, and bond premium.

D. Distributed Trust Sales Proceeds May Be Reported by Trustees and 
Middlemen of Trusts Meeting the General de minimis Test or the 
Qualified NMWHFIT Exception

    Several commentators noted that the requirement in the Reproposed 
Regulations that trustees of WHFITs other than WHMTs (NMWHFITs in these 
final regulations) report information to enable a requesting person to 
determine the amount of trust sales proceeds attributable to a 
beneficial owner would impose an undue burden. These commentators noted 
that, under current industry practice, trustees and middlemen of WHFITs 
other than WHMTs only report to the IRS and the beneficial owner the 
amount of trust sales proceeds distributed to the beneficial owner.
    The IRS and Treasury Department have determined that if a NMWHFIT 
meets either the general WHFIT de minimis test for the calendar year or 
the qualified NMWHFIT exception, the purpose of reporting trust sales 
proceeds information to beneficial owners (e.g., to enable beneficial 
owners to adjust their basis in their trust interest to account for the 
sale or disposition of the trust asset) is met if the beneficial owner 
is given information regarding the amount of trust sales proceeds 
distributed to the beneficial owner. Accordingly, if a NMWHFIT meets 
either the general WHFIT de minimis test for the calendar year, or the 
qualified NMWHFIT exception, the final regulations require: (1) 
Trustees to report information that will enable middlemen to determine 
the amount of trust sales proceeds distributed to each beneficial owner 
during the calendar year; and (2) middlemen and trustees to report to 
the IRS and to each beneficial owner the amount of trust sales proceeds 
that are distributed to that beneficial owner.

E. Simplified Reporting for WHMTs That Meet the General de minimis Test 
or the Special WHMT de minimis Test

    In addition to the general WHFIT de minimis test, the final 
regulations also provide a special WHMT de minimis test that applies to 
WHMTs that directly hold interests in mortgages (the special WHMT de 
minimis test). The special WHMT de minimis test is met if the trust 
sales proceeds received by the WHMT for the calendar year are not more 
than five percent of the aggregate outstanding principal balance of the 
WHMT (as defined in paragraph (g)(1)(iii)(D) of the final regulations) 
as of January 1 of that year. In applying the special WHMT de minimis 
test, amounts that result from the complete or partial payment of the 
outstanding principal balance of the mortgages held by the WHMT are not 
included in the amount of trust sales proceeds. A WHMT that holds 
interests in another WHMT or that holds interests in a REMIC may not 
use the special WHMT de minimis test, but may use the general WHFIT de 
minimis test (discussed in section III(B), above).
    If a WHMT meets the special WHMT de minimis test or the general 
WHFIT de minimis test, trustees and middlemen are excepted from the 
general requirement to report information to enable a beneficial owner 
to allocate basis to a sale or disposition and are only required to 
report information regarding the trust sales proceeds that are 
attributable to a particular beneficial owner. If a WHMT does not meet 
a de miminis test, trustees and middlemen must report information to 
enable a beneficial owner to allocate basis to the sale or disposition 
as well as the trust sales proceeds that are attributable to the 
beneficial owner.

[[Page 4006]]

IV. Exception for Certain Equity Trusts From the Requirement That 
Trustees and Middlemen Report Information To Enable a Requesting Person 
To Determine the Income That Is Attributable to a Redeeming or Selling 
Beneficial Owner Up to the Date of Redemption or Sale

    The Reproposed Regulations require trustees and middlemen to report 
information to enable requesting persons to determine the income of the 
WHFIT attributable to a selling, purchasing, or redeeming beneficial 
owner for the portion of the calendar year that the beneficial owner 
held its trust interest. Commentators objected to this requirement for 
WHFITs if substantially all the income of the WHFIT is comprised of 
dividends (equity trusts). These commentators noted that although 
trustees and middlemen report interest income earned by the WHFIT up to 
the date of redemption or sale of a trust interest, providing this 
information with respect to dividend income is inconsistent with long-
standing WHFIT industry reporting practice. Currently there is no 
mechanism in place for communicating this information between trustees 
and middlemen of equity trusts. Under current industry practice, the 
entire amount paid to a beneficial owner who sells or redeems an 
interest in an equity trust, including the amount paid for 
undistributed dividends held by the trust at the time of the sale or 
redemption, is reported to the IRS and to the beneficial owner as gross 
proceeds. As a result, a selling or redeeming beneficial owner may 
report the ordinary dividend income portion of the payment as a capital 
gain. The purchasing beneficial owner also receives incorrect income 
information that may lead the purchasing beneficial owner to overstate 
its dividend income. Commentators objected to expending resources for 
the development and testing of new tax reporting systems to accurately 
report dividend income to selling, purchasing, and redeeming beneficial 
owners, especially with respect to existing equity trusts.
    Commentators acknowledge, however, that the net asset value of an 
equity trust, including the cash held for distribution, generally is 
calculated on a daily basis. Because in the final regulations, the cash 
held for distribution is a key component in calculating the amount of 
income attributable to a selling, purchasing, or redeeming beneficial 
owner under the safe harbor for NMWHFITs, the final regulations retain 
the general requirement that trustees and middlemen provide information 
to determine the trust income that should be attributed to a redeeming, 
selling, or purchasing beneficial owner.
    The IRS and the Treasury Department recognize, however, that if an 
equity trust frequently distributes its income, the trust is not likely 
to accumulate significant undistributed dividend income. In such a 
case, the increased accuracy that results from providing beneficial 
owners with accurate income information up to the date of sale or 
redemption does not warrant the burden of compiling and reporting this 
information. Accordingly, under the final regulations, trustees or 
middlemen of equity trusts that are required by their governing 
documents to distribute all cash (less reasonably required reserve 
funds) held by the NMWHFIT at least monthly need not provide 
information regarding the income that is attributable to a redeeming, 
selling, or purchasing beneficial owner up to the date of sale or 
redemption. The final regulations also except trustees and middlemen of 
an equity trust that meets the qualified NMWHFIT exception (described 
in section III of this Preamble) from the requirement that trustees and 
middlemen provide information regarding the income that is attributable 
to a redeeming, selling, or purchasing beneficial owner up to the date 
of sale or redemption.

V. Safe Harbor Reporting for WHFITs

A. The Safe Harbors Must Be Used Consistently

    Under the Reproposed Regulations, a trustee of a WHFIT can decide 
whether or not to use the safe harbor reporting practices on a year-by-
year basis. The IRS and the Treasury Department have concluded, 
however, that middlemen and beneficial owners should receive WHFIT 
information that is calculated consistently from one calendar year to 
the next because, assuming beneficial owners report trust items 
consistent with the WHFIT information provided to them, a trustee's 
change in reporting could result in changes in the timing that may 
impact beneficial owners. Further, allowing trustees to report under 
the safe harbor one year and not the next, likely would confuse and 
burden the middlemen and beneficial owners that must process WHFIT 
information. Accordingly, the final regulations require trustees that 
choose to use the safe harbor to report under the safe harbor for the 
life of the WHFIT. WHFITs that have a start-up date prior to January 1, 
2007 may choose to report under the safe harbor provided the trustee 
begins to report according to the safe harbor requirements on or before 
January 1, 2007 and does so for the life of the WHFIT.
    Under the Reproposed Regulations and the final regulations, a WHMT 
must meet the eligibility requirements of Sec.  1.671-5(g)(1)(ii) and 
report consistently with the safe harbor reporting rules to be deemed 
to have met its reporting requirements under paragraph (c) of the 
regulations with respect to the trust items described in the safe 
harbor. The final regulations eliminate two of the eligibility 
requirements in the Reproposed Regulations that are inconsistent with 
the rule that the safe harbor must be used for the life of the WHMT.

B. Request for Comments Regarding the Need for Safe Harbors for 
NMWHFITs That Are Outside the Safe Harbor in the Final Regulations

    The Reproposed Regulations include safe harbor reporting rules 
available to WHFITs other than WHMTs (i.e., NMWHFITs). If the trustee 
of a WHFIT other than a WHMT reports consistently with the safe harbor, 
the trustee is deemed to have met the requirements of paragraph (c)(1) 
of the Reproposed Regulations. Those safe harbor reporting rules were 
developed in response to comments received on the 1998 Proposed 
Regulations describing the current reporting practices of WHFITs that 
primarily receive dividend and interest income.
    Upon reconsideration of those safe harbor reporting rules and the 
various types of NMWHFITs, the IRS and the Treasury Department 
recognize that the type of information reported under those reporting 
rules is only relevant to NMWHFITs that hold stock and debt instruments 
and that information reported under the safe harbor probably would not 
be useful to middlemen and beneficial owners of NMWHFITs that hold 
other types of assets. As a result, the IRS and Treasury concluded that 
safe harbor treatment should only be available to NMWHFITs for which 
the safe harbors were designed (e.g., NMWHFITs that hold stock and debt 
instruments) and that other safe harbor reporting rules should govern 
NMWHFITs that are outside the safe harbor. Accordingly, in the final 
regulations only NMWHFITs substantially all the income of which is 
comprised of dividends (as defined in section 6042(b) and the 
regulations thereunder) or interest (as defined in section 6049(b) and 
the regulations thereunder) that report as provided in the NMWHFIT safe 
harbor will be deemed to have met the requirements of paragraph (c)(1) 
of the final regulations.

[[Page 4007]]

The IRS and the Treasury Department are considering providing 
additional safe harbor reporting rules for NMWHFITs that are not under 
the NMWHFIT safe harbor in the final regulations and encourage trustees 
and middlemen to submit comments regarding NMWHFITs for which further 
reporting safe harbors should be provided, including information 
regarding current industry reporting practice for NMWHFITs that do not 
qualify for the NMWHIFIT safe harbor in the final regulations.

C. Safe Harbor Reporting for WHMTs

1. Reporting Sales and Dispositions Under the WHMT Safe Harbor
    The 1998 Proposed Regulations did not allow trustees and middlemen 
to aggregate sales and dispositions of trust assets, even fungible 
trust assets, for reporting purposes. In response to comments on the 
1998 Proposed Regulations, as well as the addition of section 
1272(a)(6)(C)(iii) to the Code in 1997, the Reproposed Regulations 
permit aggregate reporting for sales and dispositions and principal 
receipts for WHMTs eligible to report under the WHMT safe harbor. Under 
the WHMT safe harbor, a trustee is permitted to combine, for reporting 
purposes, amounts received as trust sales proceeds from the sale or 
disposition of some mortgages (including principal receipts that 
completely retire a mortgage) with non pro-rata partial principal 
payments from other mortgages. Thus, the safe harbor permits trustees 
and middlemen to report trust information as if the WHMT, in effect, 
held only one mortgage, and to report the aggregate of trust sales 
proceeds and non pro-rata partial principal payments as though the 
trustee had received a non pro-rata partial principal payment on that 
mortgage.
    The WHMT safe harbor in the Reproposed Regulations is only 
available to WHMTs that met the requirements of Sec.  1.671-5(g)(1)(ii) 
of those regulations. Commentators requested that the final regulations 
provide that trustees of all WHMTs, not just those meeting the 
eligibility requirements of Sec.  1.671-5(g)(1)(ii), be allowed to 
apply this treatment for reporting purposes. The commentators suggested 
that reporting sales and dispositions separately from principal 
payments is unnecessary because receipt by the trust of trust sales 
proceeds and receipt of principal payments have identical tax 
consequences for a beneficial owner.
    Under Rev. Rul. 84-10 (1984-1 C.B. 155), a beneficial owner of a 
WHMT is treated for federal income tax purposes as having a 
proportionate share of equitable ownership in each of the mortgages of 
the WHMT. If a taxpayer owns mortgages outright and not in trust, the 
taxpayer does not report mortgage sales proceeds or the complete 
prepayment of a mortgage in the same manner as the receipt of a non 
pro-rata partial principal payment. That is, a taxpayer that owns two 
mortgages does not combine the sale of one mortgage with the receipt of 
non pro-rata partial principal payments from the other mortgage for 
purposes of calculating the taxpayer's federal income tax liability. 
For this reason and the reasons discussed in section V(B)(3) of this 
Preamble, the IRS and Treasury Department do not adopt the 
commentators' request.
2. Requirement That Trustees Use a Prepayment Assumption When Providing 
Market Discount and OID Information Under the WHMT Safe Harbor
    The Reproposed Regulations require trustees and middlemen of all 
WHMTs to report information to enable beneficial owners to calculate 
market discount in any reasonable manner that is consistent with 
section 1276(a)(3). Regulations have not been issued under the market 
discount provisions of the Code (sections 1276 to 1278). The preamble 
to the Reproposed Regulations notes that, in the absence of regulations 
governing accrual of market discount, guidance regarding the accrual of 
market discount with respect to the partial payment of a debt 
instrument is provided in the conference report (see H.R. Rep. No. 841, 
99th Cong., 2nd Sess., at II-842 (1986)) accompanying the amendment 
that enacted section 1276(a)(3) (see section 1803(a)(13)(A) of the Tax 
Reform Act of 1986, Public Law 99-514, 100 Stat. 2085) (the Conference 
Report). Consistent with Congressional intent expressed in the 
Conference Report indicating that holders must report market discount 
in the absence of regulations, the Reproposed Regulations impose a 
general requirement that trustees and middlemen of WHMTs report market 
discount information.
    The WHMT safe harbor provision for reporting market discount 
information in the Reproposed Regulations is based on the Conference 
Report. Under that safe harbor, trustees report market discount by 
providing one market discount fraction for the WHMT that is the ratio 
of, either: (1) The OID accrued during the month to the total remaining 
OID as of the beginning of the month; or (2) the interest paid during 
the month to the remaining interest payable on the mortgages held by 
the WHMT as of the beginning of the month. The Reproposed Regulations 
require trustees to utilize a method that takes into account the 
prepayment assumption used in pricing the original issue of trust 
interests. The Reproposed Regulations also include a WHMT safe harbor 
provision for OID information that required the use of the same 
prepayment assumption.
    Commentators reported that they assumed that the Reproposed 
Regulations permit trustees to use the safe harbor for reporting only 
sales and dispositions and the receipt of principal payments and to 
ignore other trust items, such as market discount and OID, when 
reporting under the safe harbor.
    The WHMT safe harbor in the final regulations permits trustees and 
middlemen of WHMTs that meet the requirements of Sec.  1.671-
5(g)(1)(ii), to aggregate the trust sales proceeds received from sales 
and dispositions of some mortgages with non pro-rata partial principal 
payments on other mortgages, but the safe harbor also requires trustees 
and middlemen to report market discount and OID information consistent 
with section 1272(a)(6). Safe harbor treatment is available to WHMTs 
that meet the requirements of Sec.  1.671-5(g)(1)(ii) because the IRS 
and the Treasury Department have determined that, for those WHMTs, if 
market discount and OID are reported as provided in the safe harbor, 
mortgage-by-mortgage reporting with respect to sales and dispositions 
and principal payments is unnecessary. Accordingly, the final 
regulations clarify that, for a trustee to be deemed to have met the 
requirements of paragraph (c)(1) of the regulations, the trustee must 
report all items identified in the WHMT safe harbor consistent with the 
WHMT safe harbor.
3. Reporting for WHMTs That Are Outside the Safe Harbor
    Some commentators may view the Conference Report as providing 
authority to report market discount information using a single 
composite fraction, regardless of whether the trustee is permitted to, 
and does in fact, report under the WHMT safe harbor. The IRS and the 
Treasury Department disagree with the commentators' reading of the 
Conference Report as applied to WHMTs. The Conference Report simply 
provides that, until such time as the Treasury Department issues 
regulations regarding the computation of the accrual of market 
discount, holders may elect to accrue market discount using either a 
constant interest method or a market discount fraction.

[[Page 4008]]

    The Conference Report may implicitly discuss aggregate reporting in 
that it states that, in the case of debt instruments that would be 
subject to the OID rules contained in section 1272(a)(6) (without 
regard to whether the debt instruments have OID), the same prepayment 
assumption that would be made in computing OID would be made in 
computing the accrual of market discount (whether or not the taxpayer 
elects to accrue market discount on the basis of a constant interest 
rate). Section 1272(a)(6)(C)(iii) provides that section 1272(a)(6) 
applies to any pool of debt instruments, the yield on which may be 
affected by reason of prepayments. However, no guidance has been issued 
regarding the application of section 1272(a)(6)(C)(iii). Until guidance 
is issued under section 1272(a)(6)(C)(iii), the IRS and Treasury 
Department believe that it is appropriate to provide safe harbor 
treatment only for trustees of relatively straight forward arrangements 
who report information consistent with the application of section 
1272(a)(6) as provided by the safe harbor reporting rules.
4. Reporting Bond Premium Under the WHMT Safe Harbor
    The Reproposed Regulations include a general requirement that 
trustees and middlemen of all WHMTs report information to enable 
beneficial owners to determine the amount of amortizable bond premium, 
if any, in any manner that is reasonably consistent with section 171. 
The Reproposed Regulations reserve the portion of the WHMT safe harbor 
on reporting information regarding bond premium. None of the comments 
on the Reproposed Regulations specifically addressed bond premium 
issues. Accordingly, the final regulations continue to reserve guidance 
on the issue while the IRS and the Treasury Department study how bond 
premium information is to be appropriately reported for WHMTs. The IRS 
and the Treasury Department welcome comments on this issue. Until safe 
harbor reporting rules are provided for bond premium, a trustee will 
not be penalized if the trustee reports information that enables a 
beneficial owner to determine, in any manner reasonably consistent with 
section 171, the amount of the beneficial owner's amortizable bond 
premium, if any, for the calendar year.

VI. Application of Reporting Rules to Foreign Fixed Investment Trusts

    A fixed investment trust that is not classified as a United States 
person is not a WHFIT under the Reproposed Regulations or the final 
regulations. Nothing in the Reproposed Regulations or these final 
regulations alters the application of section 6048 to United States 
investors in a foreign fixed investment trust. The preamble to the 
Reproposed Regulations notes that the IRS and the Treasury Department 
continue to study how to facilitate the application of section 6048 
rules to foreign fixed investment trusts and requested comments on this 
issue, including how forms 3520 and 3520A could be adapted for use with 
foreign fixed investment trusts.
    Commentators suggested that many beneficial owners of interests in 
a foreign fixed investment trust cannot comply with the reporting 
requirements of section 6048 because they cannot obtain the necessary 
information from the trustee. These commentators suggested that, rather 
than adapting Forms 3520 and 3520A to foreign fixed investment trusts, 
the IRS and the Treasury Department should permit certain foreign fixed 
investment trusts to report pursuant to the reporting rules in these 
regulations. The commentators also suggested that the final regulations 
provide that, if a foreign fixed investment trust reports pursuant to 
these reporting rules, United States investors in the trust be excepted 
from the reporting rules in section 6048. The IRS and the Treasury 
Department intend to provide guidance in the area of foreign trust 
reporting and will consider whether any of the suggested approaches for 
WHFITs are more appropriate in this context.

VII. Effective Date of Final Regulations and Applicability to Existing 
WHFITs

    The Reproposed Regulations provide that the reporting rules were to 
be applicable beginning January 1, 2004. Most commentators requested 
that the applicability date be delayed until January 1, 2005, to enable 
trustees and middlemen to change their reporting systems to comply with 
the new reporting rules. To ensure that there is sufficient time to 
comply with the reporting requirements, the final regulations provide 
that these regulations are effective January 1, 2007. Accordingly, 
beginning with the 2007 calendar year, trustees must report trust 
information in accordance with paragraph (c) of the final regulations. 
Trustees and middlemen must file Forms 1099 with the IRS and furnish 
tax information statements to beneficial owners that meet the 
requirements of paragraphs (d) and (e) of the final regulations with 
respect to the 2007 calendar year and all subsequent years.
    Regarding the applicability of these reporting rules to existing 
WHFITs, one commentator requested that the final regulations except all 
WHFITs in existence as of the effective date of the final regulations 
from the new reporting rules. Other commentators requested that WHFITs 
in existence as of the effective date of the final regulations be 
excepted from specific provisions. The final regulations apply to all 
WHFITs, including those in existence as of the effective date. However, 
in response to the comments, the final regulations except certain 
NMWHFITs that have a start-up date on or before February 23, 2006 from 
specific reporting requirements regarding market discount, bond 
premium, sales and dispositions, redemptions, and sales of trust 
interests until January 1, 2011. The details of these exceptions have 
been discussed in sections IID, III, and IV of this preamble.

Special Analysis

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in Executive Order 12866. 
Therefore, a regulatory assessment is not required. It is hereby 
certified that these regulations will not have a significant economic 
impact on a substantial number of small entities. This certification is 
based on the fact that the regulations generally clarify existing 
reporting obligations and are expected, for the most part, to have 
minimal impact on industry practice, and to not have a significant 
economic impact on entities subject to the regulations. Further, the 
reporting burdens in these regulations will fall primarily on large 
brokerage firms, large banks, and other large entities acting as 
trustees or middlemen, most of which are not small entities within the 
meaning of the Regulatory Flexibility Act (5 U.S.C. chapter 6). Thus, a 
substantial number of small entities are not expected to be affected. 
Therefore, a Regulatory Flexibility Analysis under the Regulatory 
Flexibility Act (5 U.S.C. chapter 6) is not required. Pursuant to 
section 7805(f) of the Code, the proposed and the Reproposed 
Regulations preceding these regulations were submitted to the Chief 
Counsel for Advocacy of the Small Business Administration for comment 
on their impact on small business.

Drafting Information

    The principal author of these regulations is Faith Colson of the 
Office of Associate Chief Counsel (Passthroughs and Special 
Industries). However, other personnel from the IRS and the Treasury 
Department participated in their development.

[[Page 4009]]

List of Subjects

26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 301

    Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income 
taxes, Penalties, Reporting and recordkeeping requirements.

26 CFR Part 602

    Reporting and recordkeeping requirements.

Adoption of the Amendments to the Regulations

0
Accordingly, 26 CFR parts 1, 301, and 602 are amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read, in 
part, as follows:

    Authority: 26 U.S.C. 7805 * * *


0
Par. 2. Section 1.671-4 is amended by revising paragraph (a) to read as 
follows:


Sec.  1.671-4  Method of reporting.

    (a) Portion of trust treated as owned by the grantor or another 
person. Except as otherwise provided in paragraph (b) of this section 
and Sec.  1.671-5, items of income, deduction, and credit attributable 
to any portion of a trust that, under the provisions of subpart E 
(section 671 and following), part I, subchapter J, chapter 1 of the 
Internal Revenue Code, is treated as owned by the grantor or another 
person, are not reported by the trust on Form 1041, ``U.S. Income Tax 
Return for Estates and Trusts,'' but are shown on a separate statement 
to be attached to that form. Section 1.671-5 provides special reporting 
rules for widely held fixed investment trusts. Section 301.7701-4(e)(2) 
of this chapter provides guidance regarding the application of the 
reporting rules in this paragraph (a) to an environmental remediation 
trust.
* * * * *

0
Par. 3. Section 1.671-5 is added to read as follows:


Sec.  1.671-5  Reporting for widely held fixed investment trusts.

    (a) Table of contents. This table of contents lists the major 
paragraph headings for this section.

(a) Table of contents.
(b) Definitions.
(c) Trustee's obligation to report information.
(1) In general.
(i) Calculation.
(ii) Calculation period.
(iii) Accounting method.
(iv) Gross income requirement.
(2) Information to be reported by all WHFITs.
(i) Trust identification and calculation period chosen.
(ii) Items of income, expense, and credit.
(iii) Non pro-rata partial principal payments.
(iv) Asset sales and dispositions.
(v) Redemptions and sales of WHFIT interests.
(vi) Information regarding bond premium.
(vii) Information regarding market discount.
(viii) Other information.
(3) Identifying the representative who will provide trust 
information.
(4) Time and manner of providing information.
(i) Time.
(ii) Manner.
(iii) Inclusion of information with respect to all calculation 
periods.
(5) Requesting information from a WHFIT.
(i) In general.
(ii) Manner of requesting information.
(iii) Period of time during which a requesting person may request 
WHFIT information.
(6) Trustee's requirement to retain records.
(d) Form 1099 requirement for trustees and middlemen.
(1) Obligation to file Form 1099 with the IRS.
(i) In general.
(ii) Forms 1099 not required for exempt recipients.
(iii) Reporting and withholding with respect to foreign persons.
(2) Information to be reported.
(i) Determining amounts to be provided on Forms 1099.
(ii) Information to be provided on Forms 1099.
(3) Time and manner of filing Forms 1099.
(i) Time and place.
(ii) Reporting trust sales proceeds, redemption asset proceeds, 
redemption proceeds, sales asset proceeds, sales proceeds, and non 
pro-rata partial principal payments.
(e) Requirement to furnish a written tax information statement to 
the TIH.
(1) In general.
(2) Information required.
(i) WHFIT information.
(ii) Identification of the person furnishing the statement.
(iii) Items of income, expense, and credit.
(iv) Non pro-rata partial principal payments.
(v) Asset sales and dispositions.
(vi) Redemption or sale of a trust interest.
(vii) Information regarding market discount and bond premium.
(viii) Other information.
(ix) Required statement.
(3) Due date and other requirements.
(4) Requirement to retain records.
(f) Safe harbor for providing information for certain NMWHFITs.
(1) Safe harbor for trustee reporting of NMWHFIT information.
(i) In general.
(ii) Reporting NMWHFIT income and expenses.
(iii) Reporting non pro-rata partial principal payments under the 
safe harbor.
(iv) Reporting sales and dispositions of NMWHFIT assets under the 
safe harbor.
(v) Reporting redemptions under the safe harbor.
(vi) Reporting the sale of a trust interest under the safe harbor.
(vii) Reporting OID information under the safe harbor.
(viii) Reporting market discount information under the safe harbor.
(ix) Reporting bond premium information under the safe harbor.
(x) Reporting additional information.
(2) Use of information provided by trustees under the safe harbor 
for NMWHFITs.
(i) In general.
(ii) Determining NMWHFIT income and expenses under the safe harbor.
(iii) Reporting non pro-rata partial principal payments under the 
safe harbor.
(iv) Reporting sales and dispositions of NMWHFIT assets under the 
safe harbor.
(v) Reporting redemptions under the safe harbor.
(vi) Reporting sales of trust interests under the safe harbor.
(vii) Reporting OID information under the safe harbor.
(viii) Reporting market discount information under the safe harbor.
(ix) Reporting bond premium information under the safe harbor.
(3) Example of the use of the safe harbor for NMWHFITs.
(i) Facts.
(ii) Trustee reporting.
(iii) Brokers' use of information provided by Trustee.
(g) Safe Harbor for certain WHMTs.
(1) Safe harbor for trustees of certain WHMTs for reporting 
information.
(i) In general.
(ii) Requirements.
(iii) Reporting WHMT income, expenses, non pro-rata partial 
principal payments, and sales and dispositions under the safe 
harbor.
(iv) Reporting OID information under the safe harbor.
(v) Reporting market discount information under the safe harbor.
(vi) Reporting bond premium information under the safe harbor.
(2) Use of information provided by a trustee under the safe harbor.
(i) In general.
(ii) Reporting WHMT income, expenses, non pro-rata partial principal 
payments, and sales and dispositions under the safe harbor.
(iii) Reporting OID information under the safe harbor.
(iv) Requirement to provide market discount information under the 
safe harbor.
(v) Requirement to provide bond premium information under the safe 
harbor.
(3) Example of safe harbor in paragraph (g)(1) of this section.
(i) Facts.
(ii) Trustee reporting.
(iii) Broker's use of the information provided by Trustee.
(h) Requirement that middlemen furnish information to beneficial 
owners that are exempt recipients and non calendar year beneficial 
owners.
(1) In general.
(2) Time for providing information.
(3) Manner of providing information.
(4) Clearing organization.

[[Page 4010]]

(i) Reserved.
(j) Coordination with other information reporting rules.
(k) Backup withholding requirements.
(l) Penalties for failure to comply.
(m) Effective date.

    (b) Definitions. Solely for purposes of this section:
    (1) An asset includes any real or personal, tangible or intangible 
property held by the trust, including an interest in a contract.
    (2) An affected expense is an expense described in Sec.  1.67-
2T(i)(1).
    (3) A beneficial owner is a trust interest holder (TIH) (as defined 
in paragraph (b)(20) of this section) that holds a beneficial interest 
in a widely held fixed investment trust (WHFIT) (as defined in 
paragraph (b)(22) of this section.)
    (4) The calculation period is the period the trustee chooses under 
paragraph (c)(1)(ii) of this section for calculating the trust 
information required to be provided under paragraph (c) of this 
section.
    (5) The cash held for distribution is the amount of cash (other 
than trust sales proceeds) that would be payable to TIHs if the amount 
of a distribution were required to be determined as of the date in 
question.
    (6) A clean-up call is the redemption of all trust interests in 
termination of the WHFIT when the administrative costs of the WHFIT 
outweigh the benefits of maintaining the WHFIT.
    (7) An exempt recipient is--
    (i) Any person described in Sec.  1.6049-4(c)(1)(ii);
    (ii) A middleman (as defined in paragraph (b)(10) of this section);
    (iii) A real estate mortgage investment conduit (as defined in 
section 860(D)(a)) (REMIC);
    (iv) A WHFIT; or
    (v) A trust or an estate for which the trustee or middleman of the 
WHFIT is also required to file a Form 1041, ``U.S. Income Tax Return 
for Estates and Trusts,'' in its capacity as a fiduciary of that trust 
or estate.
    (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.
    (9) An item refers to an item of income, expense, or credit as well 
as any trust event (for example, the sale of an asset) or any 
characteristic or attribute of the trust that affects the income, 
deductions, and credits reported by a beneficial owner in any taxable 
year that the beneficial owner holds an interest in the trust. An item 
may refer to an individual item or a group of items depending on 
whether the item must be reported separately under paragraphs (c)(1)(i) 
and (e)(1) of this section.
    (10) A middleman is any TIH, other than a qualified intermediary as 
defined in Sec.  1.1031(k)-1(g), who, at any time during the calendar 
year, holds an interest in a WHFIT on behalf of, or for the account of, 
another TIH, or who otherwise acts in a capacity as an intermediary for 
the account of another person. A middleman includes, but is not limited 
to--
    (i) A custodian of a person's account, such as a bank, financial 
institution, or brokerage firm acting as custodian of an account;
    (ii) A nominee;
    (iii) A joint owner of an account or instrument other than--
    (A) A joint owner who is the spouse of the other owner; and
    (B) A joint owner who is the beneficial owner and whose name 
appears on the Form 1099 filed with respect to the trust interest under 
paragraph (d) of this section; and
    (iv) A broker (as defined in section 6045(c)(1) and Sec.  1.6045-
1(a)(1)), holding an interest for a customer in street name.
    (11) A mortgage is an obligation that is principally secured by an 
interest in real property within the meaning of Sec.  1.860G-2(a)(5), 
except that a mortgage does not include an interest in another WHFIT or 
mortgages held by another WHFIT.
    (12) A non-mortgage widely held fixed investment trust (NMWHFIT) is 
a WHFIT other than a widely held mortgage trust (as defined in 
paragraph (b)(23) of this section).
    (13) A non pro-rata partial principal payment is any partial 
payment of principal received on a debt instrument which does not 
retire the debt instrument and which is not a pro-rata prepayment 
described in Sec.  1.1275-2(f)(2).
    (14) The redemption asset proceeds equal the redemption proceeds 
(as defined in paragraph (b)(15) of this section) less the cash held 
for distribution with respect to the redeemed trust interest.
    (15) The redemption proceeds equal the total amount paid to a 
redeeming TIH as the result of a redemption of a trust interest.
    (16) A requesting person is--
    (i) A middleman;
    (ii) A beneficial owner who is a broker;
    (iii) A beneficial owner who is an exempt recipient who holds a 
trust interest directly and not through a middleman;
    (iv) A noncalendar-year beneficial owner who holds a trust interest 
directly and not through a middleman; or
    (v) A representative or agent of a person specified in this 
paragraph (b)(16).
    (17) The sales asset proceeds equal the sales proceeds (as defined 
in paragraph (b)(18) of this section) less the cash held for 
distribution with respect to the sold trust interest at the time of the 
sale.
    (18) The sales proceeds equal the total amount paid to a selling 
TIH in consideration for the sale of a trust interest.
    (19) The start-up date is the date on which substantially all of 
the assets have been deposited with the trustee of the WHFIT.
    (20) A trust interest holder (TIH) is any person who holds a direct 
or indirect interest, including a beneficial interest, in a WHFIT at 
any time during the calendar year.
    (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 Sec.  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 Sec.  1.6045-(d)(3).
    (22) A widely held fixed investment trust (WHFIT) is an arrangement 
classified as a trust under Sec.  301.7701-4(c) of this chapter, 
provided that--
    (i) The trust is a United States person under section 
7701(a)(30)(E);
    (ii) The beneficial owners of the trust are treated as owners under 
subpart E, part I, subchapter J, chapter 1 of the Internal Revenue 
Code; and
    (iii) At least one interest in the trust is held by a middleman.
    (23) A widely held mortgage trust (WHMT) is a WHFIT, the assets of 
which consist only of one or more of the following--
    (i) Mortgages;
    (ii) Regular interests in a REMIC;
    (iii) Interests in another WHMT;
    (iv) Reasonably required reserve funds;
    (v) Amounts received on the assets described in paragraphs 
(b)(23)(i), (ii), (iii), and (iv) of this section pending distribution 
to TIHs; and
    (vi) During a brief initial funding period, cash and short-term 
contracts for the purchase of the assets described in paragraphs 
(b)(23)(i), (ii), and (iii).
    (c) Trustee's obligation to report information--(1) In general. 
Upon the

[[Page 4011]]

request of a requesting person (as defined in paragraph (b)(16) of this 
section), a trustee of a WHFIT must report the information described in 
paragraph (c)(2) of this section to the requesting person. The trustee 
must determine such information in accordance with the following 
rules--
    (i) Calculation. WHFIT information may be calculated in any manner 
that enables a requesting person to determine with reasonable accuracy 
the WHFIT items described in paragraph (c)(2) of this section that are 
attributable (or, if permitted under paragraphs (c)(2)(iv)(B) or 
(f)(2)(iii) of this section, distributed) to a beneficial owner for the 
taxable year of that owner. The manner of calculation must generally 
conform with industry practice for calculating the WHFIT items 
described in paragraph (c)(2) of this section for the type of asset or 
assets held by the WHFIT, and must enable a requesting person to 
separately state any WHFIT item that, if taken into account separately 
by a beneficial owner, would result in an income tax liability 
different from that which would result if the owner did not take the 
item into account separately.
    (ii) Calculation period--WHFIT information may be calculated on the 
basis of a calendar month, calendar quarter, or half or full calendar 
year, provided that a trustee uses the same calculation period for the 
life of the WHFIT and the information provided by the trustee meets the 
requirements of paragraph (c)(1)(i) of this section. Regardless of the 
calculation period chosen by the trustee, the trustee must provide 
information requested by a requesting person under paragraph (c)(5) on 
a calendar year basis. The trustee may provide additional information 
to requesting persons throughout the calendar year at the trustee's 
discretion.
    (iii) Accounting method--(A) General rule. WHFIT information must 
be calculated and reported using the cash receipts and disbursements 
method of accounting unless another method is required by the Internal 
Revenue Code or regulations with respect to a specific trust item. 
Accordingly, a trustee must provide information necessary for TIHs to 
comply with the rules of subtitle A, chapter 1, subchapter P, part V, 
subpart A of the Internal Revenue Code, which require the inclusion of 
accrued amounts with respect to OID, and section 860B(b), which 
requires the inclusion of accrued amounts with respect to a REMIC 
regular interest.
    (B) Exception for WHFITs marketed predominantly to taxpayers on the 
accrual method. If the trustee or the trust's sponsor knows or 
reasonably should know that a WHFIT is marketed primarily to accrual 
method TIHs and the WHFIT holds assets for which the timing of the 
recognition of income is materially affected by the use of the accrual 
method of accounting, the trustee must calculate and report trust 
information using the accrual method of accounting.
    (iv) Gross income requirement. The amount of income required to be 
reported by the trustee is the gross income (as defined in section 61) 
generated by the WHFIT's assets. Thus, in the case of a WHFIT that 
receives a payment of income from which an expense (or expenses) has 
been deducted, the trustee, in calculating the income to be reported 
under paragraph (c)(2)(ii) of this section, must report the income 
earned on the trusts assets unreduced by the deducted expense or 
expenses and separately report the deducted expense or expenses. See 
paragraph (c)(2)(iv) of this section regarding reporting with respect 
to sales and dispositions.
    (2) Information to be reported by all WHFITs. With respect to all 
WHFITs--
    (i) Trust identification and calculation period chosen. The trustee 
must report information identifying the WHFIT, including--
    (A) The name of the WHFIT;
    (B)The employer identification number of the WHFIT;
    (C) The name and address of the trustee;
    (D) The Committee on Uniform Security Identification Procedure 
(CUSIP) number, account number, serial number, or other identifying 
number of the WHFIT;
    (E) The classification of the WHFIT as either a WHMT or NMWHFIT; 
and
    (F) The calculation period used by the trustee.
    (ii) Items of income, expense, and credit. The trustee must report 
information detailing--
    (A) All items of gross income (including OID);
    (B) All items of expense (including affected expenses); and
    (C) All items of credit.
    (iii) Non pro-rata partial principal payments. The trustee must 
report information detailing non pro-rata partial principal payments 
(as defined in paragraph (b)(13) of this section) received by the 
WHFIT.
    (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 Sec.  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) General rule. Except as provided in paragraph (c)(2)(iv)(B) 
(regarding the exception for certain NMWHFITs) or (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, or the qualified NMWHFIT exception of 
paragraph (c)(2)(iv)(E) 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

[[Page 4012]]

WHMT de minimis 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 aggregate fair 
market value of all assets held by the trust as of the later of January 
1st of that year or the trust's start-up date (as defined in paragraph 
(b)(19) of this section).
    (2) Special WHMT de minimis test. A WHMT that meets the asset 
requirement of paragraph (g)(1)(ii)(D) of this section 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 paragraph (g)(1)(iii)(D) of this section) as of the later of 
January 1st 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 paragraph (b)(6) of this 
section, the WHFIT will be treated as having met the de minimis test.
    (E) Qualified NMWHFIT exception. The qualified NMWHFIT exception is 
satisfied if a NMWHFIT has a start-up date that is before February 23, 
2006 and the calendar year for which the trustee is reporting begins 
before January 1, 2011.
    (v) Redemptions and sales of WHFIT interests--(A) Redemptions--(1) 
In general. Unless paragraph (c)(2)(v)(C) of this section (regarding 
certain NMWHFITs with dividend income) applies, for each date on which 
the amount of redemption proceeds for the redemption of a trust 
interest is determined, the trustee must provide information to enable 
a requesting person to determine--
    (i) The redemption proceeds (as defined in paragraph (b)(15) of 
this section) per trust interest on that date;
    (ii) The redemption asset proceeds (as defined in paragraph (b)(14) 
of this section) per trust interest on that date; and
    (iii) The gross income that is attributable to the redeeming 
beneficial owner for the portion of the calendar year that the 
redeeming beneficial owner held its interest (including income earned 
by the WHFIT after the date of the last income distribution).
    (2) In-kind redemptions. The value of the assets received with 
respect to an in-kind redemption (as defined in paragraph (b)(8) of 
this section) is not required to be reported under this paragraph 
(c)(2)(v)(A). Information regarding the income attributable to a 
redeeming beneficial owner must, however, be reported under paragraph 
(c)(2)(v)(A)(1)(iii) of this section.
    (B) Sale of a trust interest--Unless paragraph (c)(2)(v)(C) 
(regarding certain NMWHFITs with dividend income) of this section 
applies, if a secondary market for trust interests in the WHFIT is 
established, the trustee must provide, for each day of the calendar 
year, information to enable a requesting person to determine--
    (1) The sale asset proceeds (as defined in paragraph (b)(17) of 
this section) per trust interest on that date; and
    (2) The gross income that is attributable to a selling beneficial 
owner and to a purchasing beneficial owner for the portion of the 
calendar year that each held the trust interest.
    (C) Exception for certain NMWHFITs with dividend income. The 
trustee of a NMWHFIT to which this paragraph applies is not required to 
report the information described in paragraph (c)(2)(v)(A) (regarding 
redemptions) or (c)(2)(v)(B) (regarding sales) of this section. 
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. 
This paragraph 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--
    (1) The trustee is required by the governing document of the 
NMWHFIT to make distributions of all cash (less reasonably required 
reserve funds) held by the NMWHFIT no less frequently than monthly; or
    (2) 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 for the calendar year, a NMWHFIT meets 
either the general WHFIT de minimis test of paragraph (c)(2)(iv)(D)(1) 
of this section or the qualified NMWHFIT exception of paragraph 
(c)(2)(iv)(E) 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 the market discount that has accrued 
during the calendar year. However, if for the calendar year, a NMWHFIT 
meets either the general WHFIT de minimis test of paragraph 
(c)(2)(iv)(D)(1) of this section or the qualified NMWHFIT exception of 
paragraph (c)(2)(iv)(E) of this section, the trustee of such NMWHFIT is 
not required to provide information regarding market discount.
    (viii) Other information. The trustee must provide any other 
information necessary for a beneficial owner of a trust interest to 
report, with reasonable accuracy, the items (as defined in paragraph 
(b)(9) of this section) attributable to the portion of the trust 
treated as owned by the beneficial owner under section 671.
    (3) Identifying the representative who will provide trust 
information. The trustee must identify a representative of the WHFIT 
who will provide the information specified in this paragraph (c). The 
trustee also may identify an Internet website at which the trustee will 
provide the information specified in this paragraph (c). This 
information must be--
    (i) Printed in a publication generally read by, and available to, 
requesting persons;
    (ii) Stated in the trust's prospectus; or
    (iii) Posted at the trustee's Internet website.
    (4) Time and manner of providing information--(i) Time--(A) In 
general. Except as provided in paragraph (c)(4)(i)(B) of this section, 
a trustee must provide the information specified in this paragraph (c) 
to requesting persons on or before the later of--
    (1) The 30th day after the close of the calendar year to which the 
request relates; or
    (2) The day that is 14 days after the receipt of the request.
    (B) Trusts holding interests in other WHFITs or in REMICs. If the 
WHFIT holds an interest in one or more other WHFITs or holds one or 
more REMIC regular interests, or holds both, a trustee must provide the 
information specified in this paragraph (c) to requesting persons on or 
before the later of--

[[Page 4013]]

    (1) The 44th day after the close of the calendar year to which the 
request relates; or
    (2) The day that is 28 days after the receipt of the request.
    (ii) Manner. The information specified in this paragraph (c) must 
be provided--
    (A) By written statement sent by first class mail to the address 
provided by the requesting person;
    (B) By causing it to be printed in a publication generally read by 
and available to requesting persons and by notifying requesting persons 
in writing of the publication in which it will appear, the date on 
which it will appear, and, if possible, the page on which it will 
appear;
    (C) By causing it to be posted at an Internet website, provided the 
trustee identifies the website under paragraph (c)(3) of this section;
    (D) By electronic mail provided that the requesting person requests 
that the trustee furnish the information by electronic mail and the 
person furnishes an electronic address; or
    (E) By any other method agreed to by the trustee and the requesting 
person.
    (iii) Inclusion of information with respect to all calculation 
periods. If a trustee calculates WHFIT information using a calculation 
period other than a calendar year, the trustee must provide information 
for each calculation period that falls within the calendar year 
requested.
    (5) Requesting information from a WHFIT--(i) In general. Requesting 
persons may request the information specified in this paragraph (c) 
from a WHFIT.
    (ii) Manner of requesting information. In requesting WHFIT 
information, a requesting person must specify the WHFIT and the 
calendar year for which information is requested.
    (iii) Period of time during which a requesting person may request 
WHFIT information. For the life of the WHFIT and for five years 
following the date of the WHFIT's termination, a requesting person may 
request the information specified in this paragraph (c) for any 
calendar year of the WHFIT's existence beginning with the 2007 calendar 
year.
    (6) Trustee's requirement to retain records. For the life of the 
WHFIT and for five years following the date of termination of the 
WHFIT, the trustee must maintain in its records a copy of the 
information required to be provided to requesting persons this 
paragraph (c) for each calendar year beginning with the 2007 calendar 
year. For a period of five years following the close of the calendar 
year to which the data pertains, the trustee also must maintain in its 
records such supplemental data as may be necessary to establish that 
the information provided to requesting persons is correct and meets the 
requirements of this paragraph (c).
    (d) Form 1099 requirement for trustees and middlemen--(1) 
Obligation to file Form 1099 with the IRS--(i) In general. Except as 
provided in paragraphs (d)(1)(ii) and (iii) of this section--
    (A) The trustee must file with the IRS the appropriate Forms 1099, 
reporting the information specified in paragraph (d)(2) of this section 
with respect to any TIH who holds an interest in the WHFIT directly and 
not through a middleman; and
    (B) Every middleman must file with the IRS the appropriate Forms 
1099, reporting the information specified in paragraph (d)(2) of this 
section with respect to any TIH on whose behalf or account the 
middleman holds an interest in the WHFIT or acts as an intermediary.
    (ii) Forms 1099 not required for exempt recipients--(A) In general. 
A Form 1099 is not required with respect to a TIH who is an exempt 
recipient (as defined in paragraph (b)(7) of this section), unless the 
trustee or middleman backup withholds under section 3406 on payments 
made to an exempt recipient (because, for example, the exempt recipient 
has failed to furnish a Form W-9 on request). If the trustee or 
middleman backup withholds, then the trustee or middleman is required 
to file a Form 1099 under this paragraph (d) unless the trustee or 
middleman refunds the amount withheld in accordance with Sec.  
31.6413(a)-3 of this chapter.
    (B) Exempt recipients must include WHFIT information in computing 
taxable income. A beneficial owner who is an exempt recipient must 
obtain WHFIT information and must include the items (as defined in 
paragraph (b)(9) of this section) of the WHFIT in computing its taxable 
income on its federal income tax return. Paragraphs (c)(3) and (h) of 
this section provide rules for exempt recipients to obtain information 
from a WHFIT.
    (iii) Reporting and withholding with respect to foreign persons. 
The items of the WHFIT attributable to a TIH who is not a United States 
person must be reported, and amounts must be withheld, as provided 
under subtitle A, chapter 3 of the Internal Revenue Code (sections 1441 
through 1464) and the regulations thereunder and not reported under 
this paragraph (d).
    (2) Information to be reported--(i) Determining amounts to be 
provided on Forms 1099. The amounts reported to the IRS for a calendar 
year by a trustee or middleman on the appropriate Form 1099 must be 
consistent with the information provided by the trustee under paragraph 
(c) of this section and must reflect with reasonable accuracy the 
amount of each item required to be reported on a Form 1099 that is 
attributable (or if permitted under paragraphs (d)(2)(ii)(D) and (E) of 
this section, distributed) to the TIH. If the trustee, in providing 
WHFIT information, uses the safe harbors in paragraph (f)(1) or (g)(1) 
of this section, then the trustee or middleman must calculate the 
information to be provided to the IRS on the Forms 1099 in accordance 
with paragraph (f)(2) or (g)(2) of this section, as appropriate.
    (ii) Information to be provided on Forms 1099. The trustee or 
middleman must include on the appropriate Forms 1099:
    (A) Taxpayer information. The name, address, and taxpayer 
identification number of the TIH;
    (B) Information regarding the person filing the Form 1099. The 
name, address, taxpayer identification number, and telephone number of 
the person required to file the Form 1099;
    (C) Gross income. All items of gross income of the WHFIT 
attributable to the TIH for the calendar year (including OID and all 
amounts of income attributable to a selling, purchasing, or redeeming 
TIH for the portion of the calendar year that the TIH held its interest 
(unless paragraph (c)(2)(v)(C) of this section (regarding certain 
NMWHFITs with dividend income) applies));
    (D) Non pro-rata partial principal payments. All non pro-rata 
partial principal payments (as defined in paragraph (b)(13) of this 
section) received by the WHFIT that are attributable (or distributed, 
in the case of a trustee or middleman reporting under paragraph 
(f)(2)(iii) of this section) to the TIH;
    (E) Trust sales proceeds. All trust sales proceeds (as defined in 
paragraph (b)(21) of this section) that are attributable to the TIH for 
the calendar year, if any, or, if paragraph (c)(2)(iv)(B) of this 
section (regarding certain NMWHFITs) applies, the amount of trust sales 
proceeds distributed to the TIH for the calendar year;
    (F) Reporting redemptions. All redemption asset proceeds (as 
defined in paragraph (b)(14) of this section) paid to the TIH for the 
calendar year, if any, or, if paragraph (c)(2)(v)(C) of this section 
(regarding certain NMWHFITs with dividend income) applies, all 
redemption proceeds (as defined in paragraph (b)(15) of this section) 
paid to the TIH for the calendar year;

[[Page 4014]]

    (G) Reporting sales of a trust interest on a secondary market. All 
sales asset proceeds (as defined in paragraph (b)(17) of this section) 
paid to a TIH for the sale of a trust interest or interests on a 
secondary market established for the WHFIT for the calendar year, if 
any, or, if paragraph (c)(2)(v)(C) of this section (regarding certain 
NMWHFITs with dividend income) applies, all sales proceeds (as defined 
in paragraph (b)(18) of this section) paid to the TIH for the calendar 
year; and
    (H) Other information. Any other information required by the Form 
1099.
    (3) Time and manner of filing Forms 1099--(i) Time and place. The 
Forms 1099 required to be filed under this paragraph (d) must be filed 
on or before February 28 (March 31, if filed electronically) of the 
year following the year for which the Forms 1099 are being filed. The 
returns must be filed with the appropriate Internal Revenue Service 
Center, at the address listed in the instructions for the Forms 1099. 
For extensions of time for filing returns under this section, see Sec.  
1.6081-1, the instructions for the Forms 1099, and applicable revenue 
procedures (see Sec.  601.601(d)(2) of this chapter). For magnetic 
media filing requirements, see Sec.  301.6011-2 of this chapter.
    (ii) Reporting trust sales proceeds, redemption asset proceeds, 
redemption proceeds, sale asset proceeds, sales proceeds and non pro-
rata partial principal payments--(A) Form to be used. Trust sales 
proceeds, redemption asset proceeds, redemption proceeds, sale asset 
proceeds, sales proceeds, and non pro-rata partial principal payments 
are to be reported on the same type of Form 1099 as that required for 
reporting gross proceeds under section 6045.
    (B) Appropriate reporting for in-kind redemptions. The value of the 
assets distributed with respect to an in-kind redemption is not 
required to be reported to the IRS. Unless paragraph (c)(2)(v)(C) of 
this section applies, the trustee or middleman must report the gross 
income attributable to the redeemed trust interest for the calendar 
year up to the date of the redemption under paragraph (d)(2)(ii)(C) of 
this section.
    (e) Requirement to furnish a written tax information statement to 
the TIH--(1) In general. Every trustee or middleman required to file 
appropriate Forms 1099 under paragraph (d) of this section with respect 
to a TIH must furnish to that TIH (the person whose identifying number 
is required to be shown on the form) a written tax information 
statement showing the information described in paragraph (e)(2) of this 
section. The amount of a trust item reported to a TIH under this 
paragraph (e) must be consistent with the information reported to the 
IRS with respect to the TIH under paragraph (d) of this section. 
Information provided in this written statement must be determined in 
accordance with the rules provided in paragraph (d)(2)(i) of this 
section (regardless of whether the information was required to be 
provided on a Form 1099). Further, the trustee or middleman must 
separately state on the written tax information statement any items 
that, if taken into account separately by that TIH, would result in an 
income tax liability that is different from the income tax liability 
that would result if the items were not taken into account separately.
    (2) Information required. For the calendar year, the written tax 
information statement must meet the following requirements:
    (i) WHFIT information. The written tax information statement must 
include the name of the WHFIT and the identifying number of the WHFIT ;
    (ii) Identification of the person furnishing the statement. The 
written tax information statement must include the name, address, and 
taxpayer identification number of the person required to furnish the 
statement;
    (iii) Items of income, expense, and credit. The written tax 
information statement must include information regarding the items of 
income (that is, the information required to be reported to the IRS on 
Forms 1099), expense (including affected expenses), and credit that are 
attributable to the TIH for the calendar year;
    (iv) Non pro-rata partial principal payments. The written tax 
information statement must include the information required to be 
reported to the IRS on Forms 1099 under paragraph (d)(2)(ii)(D) of this 
section (regarding the non pro-rata partial principal payments that are 
attributable (or distributed, in the case of a trustee or middleman 
reporting under paragraph (f)(2)(iii) of this section) to the TIH for 
the calendar year).
    (v) Asset sales and dispositions--(A) General rule. Unless 
paragraph (c)(2)(iv)(B) (regarding the exception for certain NMWHFITs) 
or (c)(2)(iv)(C) (regarding the exception for certain WHMTs) of this 
section applies, the written tax information statement must include, 
with respect to each sale or disposition of a WHFIT asset for the 
calendar year--
    (1) The date of sale or disposition;
    (2) Information regarding the trust sales proceeds that are 
attributable to the TIH as a result of the sale or disposition; and
    (3) Information that will enable the TIH to allocate with 
reasonable accuracy a portion of the TIH's basis in the TIH's trust 
interest to the sale or disposition.
    (B) Special rule for certain NMWHFITs and WHMTs. In the case of a 
NMWHFIT to which paragraph (c)(2)(iv)(B) of this section applies or in 
the case of a WHMT to which paragraph (c)(2)(iv)(C) of this section 
applies, the written tax information statement must include, with 
respect to asset sales and dispositions, only the information required 
to be reported to the IRS on Form 1099 under paragraph (d)(2)((ii)(E) 
of this section.
    (vi) Redemption or sale of a trust interest. The written tax 
information statement must include the information required to be 
reported to the IRS on Forms 1099 under paragraphs (d)(2)(ii)(F) and 
(G) of this section (regarding the sales and redemptions of trust 
interests made by the TIH for the calendar year);
    (vii) Information regarding market discount and bond premium. The 
written tax information statement must include the information required 
to be reported by the trustee under paragraphs (c)(2)(vi) and (vii) of 
this section (regarding bond premium and market discount);
    (viii) Other information. The written tax information statement 
must include any other information necessary for the TIH to report, 
with reasonable accuracy for the calendar year, the items (as defined 
in paragraph (b)(9) of this section) attributable to the portion of the 
trust treated as owned by the TIH under section 671. The written tax 
information statement may include information with respect to a trust 
item on a per trust interest basis if the trustee has reported (or 
calculated) the information with respect to that item on a per trust 
interest basis and information with respect to that item is not 
required to be reported on a Form 1099; and
    (ix) Required statement. The written tax information statement must 
inform the TIH that the items of income, deduction, and credit, and any 
other information shown on the statement must be taken into account in 
computing the taxable income and credits of the TIH on the Federal 
income tax return of the TIH. If the written tax information statement 
reports that an amount of qualified dividend income is attributable to 
the TIH, the written tax information statement also must inform the TIH 
that the TIH must meet the requirements of section 1(h)(11)(B)(iii) to 
treat the dividends as qualified dividends.
    (3) Due date and other requirements. The written tax information 
statement

[[Page 4015]]

must be furnished to the TIH on or before March 15 of the year 
following the calendar year for which the statement is being furnished.
    (4) Requirement to retain records. For a period of no less than 
five years from the due date for furnishing the written tax information 
statement, a trustee or middleman must maintain in its records a copy 
of any written tax information statement furnished to a TIH, and such 
supplemental data as may be required to establish the correctness of 
the statement.
    (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.
    (1) Substantially all of the NMWHFIT's income is from dividends (as 
defined in section 6042(b) and the regulations thereunder) or interest 
(as defined in section 6049(b) and the regulations thereunder); and
    (2) All trust interests have identical value and rights
    (B) Consistency requirements. The trustee must--
    (1) Calculate all trust items subject to the safe harbor consistent 
with the safe harbor; and, (2) Report under this paragraph (f)(1) for 
the life of the NMWHFIT; or, if the NMWHFIT has a start-up date before 
January 1, 2007, the NMWHFIT must begin reporting under this paragraph 
(f)(1) as of January 1, 2007 and must continue to report under this 
paragraph for the life of the NMWHFIT.
    (ii) Reporting NMWHFIT income and expenses. A trustee must first 
determine the total amount of NMWHFIT distributions (both actual and 
deemed) for the calendar year and then express each income or expense 
item as a fraction of the total amount of NMWHFIT distributions. These 
fractions (hereinafter referred to as factors) must be accurate to at 
least four decimal places.
    (A) Step One: Determine the total amount of NMWHFIT distributions 
for the calendar year. The trustee must determine the total amount of 
NMWHFIT distributions (actual and deemed) for the calendar year. If the 
calculation of the total amount of NMWHFIT distributions under this 
paragraph (f)(1)(ii)(A) results in a zero or a negative number, the 
trustee may not determine income and expense information under this 
paragraph (f)(1)(ii)(A) (but may report all other applicable items 
under this paragraph (f)(1)). The total amount of NMWHFIT distributions 
equals the amount of NMWHFIT funds paid out to all TIHs (including all 
trust sales proceeds, all principal receipts, and all redemption 
proceeds) for the calendar year--
    (1) Increased by--
    (i) All amounts that would have been distributed during the 
calendar year, but were instead reinvested pursuant to a reinvestment 
plan; and
    (ii) All cash held for distribution to TIHs as of December 31 of 
the year for which the trustee is reporting; and
    (2) Decreased by--
    (i) All cash distributed during the current year that was included 
in a year-end cash allocation factor (see paragraph (f)(1)(ii)(C)(1) of 
this section) for a prior year;
    (ii) All redemption asset proceeds paid for the calendar year, or 
if paragraph (c)(2)(v)(C) of this section applies to the NMWHFIT, all 
redemption proceeds paid for the calendar year;
    (iii) All trust sales proceeds distributed during the calendar 
year; and
    (iv) All non pro-rata partial principal payments distributed during 
the calendar year.
    (3) For the purpose of determining the amount of all redemption 
asset proceeds or redemption proceeds paid for the calendar year with 
respect to paragraph (f)(1)(ii)(A)(2)(ii) of this section, the value of 
the assets (not including cash) distributed with respect to an in-kind 
redemption is disregarded. Any cash distributed as part of the 
redemption must be included in the total amount of NMWHFIT 
distributions.
    (B) Step Two: Determine factors that express the ratios of NMWHFIT 
income and expenses to the total amount of NMWHFIT distributions. The 
trustee must determine factors that express the ratios of NMWHFIT 
income and expenses to the total amount of NMWHFIT distributions as 
follows:
    (1) Income factors. For each item of income generated by the 
NMWHFIT's assets for the calendar year, the trustee must determine the 
ratio of the gross amount of that item of income to the total amount of 
NMWHFIT distributions for the calendar year; and
    (2) Expense factors. For each item of expense paid by a NMWHFIT 
during the calendar year, the trustee must determine the ratio of the 
gross amount of that item of expense to the total amount of NMWHFIT 
distributions for the calendar year.
    (C) Step Three: Determine adjustments for reconciling the total 
amount of NMWHFIT distributions (determined under Step One) with 
amounts actually paid to TIHs. Paragraph (f)(1)(ii)(B) of this section 
(Step Two) requires an item of income or expense to be expressed as a 
ratio of that item to the total amount of NMWHFIT distributions as 
determined in paragraph (f)(1)(ii)(A) of this section (Step One). A 
TIH's share of the total amount of NMWHFIT distributions may differ 
from the amount actually paid to that TIH. A trustee, therefore, must 
provide information that can be used to compute a TIH's share of the 
total amount of NMWHFIT distributions based on the amount actually paid 
to the TIH. A trustee satisfies this requirement by providing a current 
year-end cash allocation factor, a prior year cash allocation factor, 
and the date on which the prior year cash was distributed to TIHs 
(prior year cash distribution date).
    (1) The current year-end cash allocation factor. The current year-
end cash allocation factor is the amount of cash held for distribution 
to TIHs by the NMWHFIT as of December 31 of the calendar year for which 
the trustee is reporting, divided by the number of trust interests 
outstanding as of that date.
    (2) The prior year cash allocation factor. The prior year cash 
allocation factor is the amount of the distribution during the calendar 
year for which the trustee is reporting that was included in 
determining a year-end cash allocation factor for a prior year, divided 
by the number of trust interests outstanding on the date of the 
distribution.
    (iii) Reporting non pro-rata partial principal payments under the 
safe harbor. The trustee must provide a list of dates on which non pro-
rata partial principal payments were distributed by the trust, and the 
amount distributed, per trust interest.
    (iv) Reporting sales and dispositions of NMWHFIT assets under the 
safe harbor--(A) NMWHFITs that must report under the general rule--(1) 
In general. If a NMWHFIT must report under the general rule of 
paragraph (c)(2)(iv)(A) of this section, the trustee must provide a 
list of dates (from earliest to latest) on which sales or

[[Page 4016]]

dispositions of NMWHFIT assets occurred during the calendar year for 
which the trustee is reporting and, for each date identified, provide--
    (i) The trust sales proceeds received by the trust, per trust 
interest, with respect to the sales and dispositions, on that date;
    (ii) The trust sales proceeds distributed to TIHs, per trust 
interest, with respect to the sales and dispositions on that date, and 
the date that the trust sales proceeds were distributed to the TIHs; 
and
    (iii) The ratio (expressed as a percentage) of the assets sold or 
disposed of on that date to all assets held by the NMWHFIT.
    (2) Determination of the portion of all assets held by the NMWHFIT 
that the assets sold or disposed of represented--
    (i) If a NMWHFIT terminates within twenty-four months of its start-
up date, the ratio of the assets sold or disposed of on that date to 
all assets held by the NMWHFIT is based on the fair market value of the 
NMWHFIT's assets as of the start-up date; or
    (ii) If a NMWHFIT terminates more than twenty-four months after its 
start-up date, the ratio of the assets sold or disposed of on that date 
to all assets held by the NMWHFIT is based on the fair market value of 
the NMWHFIT's assets as of the date of the sale or disposition.
    (B) NMWHFITs excepted from the general rule. If paragraph 
(c)(2)(iv)(B) of this section applies to the NMWHFIT, the trustee must 
provide a list of dates on which trust sales proceeds were distributed, 
and the amount of trust sales proceeds, per trust interest, that were 
distributed on that date. The trustee also must also provide requesting 
persons with the statement required by paragraph (c)(2)(iv)(B) of this 
section.
    (v) Reporting redemptions under the safe harbor--(A) In general. 
The trustee must:
    (1) Provide a list of dates on which the amount of redemption 
proceeds paid for the redemption of a trust interest was determined and 
the amount of the redemption asset proceeds determined per trust 
interest on that date, or if paragraph (c)(2)(v)(C) of this section 
applies to the NMWHFIT, the amount of redemption proceeds determined on 
that date; or
    (2) Provide to each requesting person that held (either for its own 
behalf or for the behalf of a TIH) a trust interest that was redeemed 
during the calendar year, the date of the redemption and the amount of 
the redemption asset proceeds per trust interest determined on that 
date, or if paragraph (c)(2)(v)(C) of this section applies to the 
NMWHFIT, the amount of the redemption proceeds determined for that 
date; and
    (B) Paragraph (c)(2)(v)(C) statement. If paragraph (c)(2)(v)(C) of 
this section applies to the NMWHFIT, the trustee must provide a 
statement to requesting persons to the effect that the trustee is 
providing information consistent with paragraph (c)(2)(v)(C) of this 
section.
    (vi) Reporting the sale of a trust interest under the safe harbor. 
If paragraph (c)(2)(v)(C) of this section does not apply to the 
NMWHFIT, the trustee must provide, for each day of the calendar year, 
the amount of cash held for distribution, per trust interest, by the 
NMWHFIT on that date. If the trustee is able to identify the date on 
which trust interests were sold on the secondary market, the trustee 
alternatively may provide information for each day on which sales of 
trust interests occurred rather than for each day during the calendar 
year. If paragraph (c)(2)(v)(C) of this section applies to the NMWHFIT, 
the trustee is not required to provide any information under this 
paragraph (f)(1)(vi), other than a statement that the NMWHFIT meets the 
requirements to report under paragraph (c)(2)(v)(C) of this section.
    (vii) Reporting OID information under the safe harbor. The trustee 
must provide, for each calculation period, the average aggregate daily 
accrual of OID per $1,000 of original principal amount.
    (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 paragraph (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 the NMWHFIT meets either 
the de minimis test of paragraph (c)(2)(iv)(D) of this section, or the 
qualified NMWHFIT exception of paragraph (c)(2)(iv)(E) of this 
section), the trustee is not required under this paragraph (f) to 
provide any information regarding market discount.
    (B) Reporting market discount information under the safe harbor 
when the yield of the debt obligations held by the WHFIT is expected to 
be affected by prepayments. [Reserved.]
    (ix) Reporting bond premium information under the safe harbor. 
[Reserved.]
    (x) Reporting additional information. If a requesting person cannot 
use the information provided by the trustee under paragraphs (f)(1)(ii) 
through (ix) of this section to determine with reasonable accuracy the 
trust items that are attributable to a TIH, the requesting person must 
request, and the trustee must provide, additional information to enable 
the requesting person to determine the trust items that are 
attributable to the TIH. See, for example, paragraph (f)(2)(ii)(A)(4) 
of this section which requires a middleman to request additional 
information from the trustee when the total amount of WHFIT 
distributions attributable to a TIH equals zero or less.
    (2) Use of information provided by trustees under the safe harbor 
for NMWHFITs--(i) In general. If a trustee reports NMWHFIT items in 
accordance with paragraph (f)(1) of this section, the information 
provided with respect to those items on the Forms 1099 required under 
paragraph (d) of this section to be filed with the IRS and on the 
statement required under paragraph (e) of this section to be furnished 
to the TIH must be determined as provided in this paragraph (f)(2).
    (ii) Determining NMWHFIT income and expense under the safe harbor. 
The trustee or middleman must determine the amount of each item of 
income and expense attributable to a TIH as follows--
    (A) Step One: Determine the total amount of NMWHFIT distributions 
attributable to the TIH. To determine the total amount of NMWHFIT 
distributions attributable to a TIH for the calendar year, the total 
amount paid to, or credited to the account of, the TIH during the 
calendar year (including amounts paid as trust sales proceeds or 
partial non-pro rata principal payments, redemption proceeds, and sales 
proceeds) is--
    (1) Increased by--
    (i) All amounts that would have been distributed during the 
calendar year to the TIH, but that were reinvested pursuant to a 
reinvestment plan (unless another person (for example, the custodian of 
the reinvestment plan) is responsible for reporting these amounts under 
paragraph (d) of this section); and
    (ii) An amount equal to the current year-end cash allocation factor 
(provided by the trustee in accordance with paragraph (f)(1)(ii)(C)(1) 
of this section) multiplied by the number of trust interests held by 
the TIH as of December 31 of the calendar year for which the trustee is 
reporting; and
    (2) Decreased by--
    (i) An amount equal to the prior year cash allocation factor 
(provided by the trustee in accordance with paragraph (f)(1)(ii)(C)(2) 
of this section) multiplied by the number of trust interests held by 
the TIH on the date of the distribution;

[[Page 4017]]

    (ii) An amount equal to all redemption asset proceeds paid to the 
TIH for the calendar year, or if paragraph (c)(2)(v)(C) of this section 
applies to the NMWHFIT, an amount equal to all redemption proceeds paid 
to the TIH for the calendar year;
    (iii) An amount equal to all sale asset proceeds paid to the TIH 
for the calendar year, or if paragraph (c)(2)(v)(C) of this section 
applies to the NMWHFIT, the amount of sales proceeds paid to the TIH 
for the calendar year;
    (iv) In the case of a TIH that purchased a trust interest in a 
NMWHFIT to which paragraph (c)(2)(v)(C) of this section does not apply, 
an amount equal to the cash held for distribution per trust interest on 
the date that the TIH acquired its interest, multiplied by the trust 
interests acquired on that date;
    (v) The amount of the trust sales proceeds distributed to the TIH, 
calculated as provided in paragraph (f)(2)(iv)(A)(3) of this section; 
and
    (vi) The amount of non pro-rata partial principal prepayments 
distributed to the TIH during the calendar year, calculated as provided 
in paragraph (f)(2)(iii) of this section.
    (3) Treatment of in-kind distributions under this paragraph 
(f)(2)(i). The value of the assets (not including cash) received with 
respect to an in-kind redemption is not included in the amount used in 
paragraph (f)(2)(ii)(A)(2)(ii) of this section. The cash distributed as 
part of the redemption, however, must be included in the total amount 
of NMWHFIT distributions paid to the TIH.
    (4) The total amount of distributions attributable to a TIH 
calculated under this paragraph (f)(2)(i)(A) equals zero or less. If 
the total amount of distributions attributable to a TIH, calculated 
under this paragraph (f)(2)(i)(A), equals zero or less, the trustee or 
middleman may not report the income and expense attributable to the TIH 
under this paragraph (f)(2)(i). The trustee or middleman must request 
additional information from the trustee of the NMWHFIT to enable the 
trustee or middleman to determine with reasonable accuracy the items of 
income and expense that are attributable to the TIH. The trustee or 
middleman must report the other items subject to paragraph (f)(1) of 
this section in accordance with this paragraph (f)(2).
    (B) Step Two: Apply the factors provided by the trustee to 
determine the items of income and expense that are attributable to the 
TIH. The amount of each item of income (other than OID) and each item 
of expense attributable to a TIH is determined as follows--
    (1) Application of income factors. For each income factor, the 
trustee or middleman must multiply the income factor by the total 
amount of NMWHFIT distributions attributable to the TIH for the 
calendar year (as determined in paragraph (f)(2)(i)(A) of this 
section).
    (2) Application of expense factors. For each expense factor, the 
trustee or middleman must multiply the expense factor by the total 
amount of NMWHFIT distributions attributable to the TIH for the 
calendar year (as determined in paragraph (f)(2)(i)(A) of this 
section).
    (iii) Reporting non pro-rata partial principal payments under the 
safe harbor. To determine the amount of non pro-rata partial principal 
payments that are distributed to a TIH for the calendar year, the 
trustee or middleman must aggregate the amount of non pro-rata partial 
principal payments distributed to a TIH for each day that non pro-rata 
principal payments were distributed. To determine the amount of non 
pro-rata principal payments that are distributed to a TIH on each 
distribution date, the trustee or middleman must multiply the amount of 
non-pro rata principal payments per trust interest distributed on that 
date by the number of trust interests held by the TIH.
    (iv) Reporting sales and dispositions of NMWHFIT assets under the 
safe harbor--(A) Reporting under the safe harbor if the general rules 
apply to the NMWHFIT. Unless paragraph (c)(2)(iv)(B) of this section 
applies, the trustee or middleman must comply with paragraphs 
(f)(2)(iv)(A)(1), (2), and (3) of this section.
    (1) Form 1099. The trustee or middleman must report the amount of 
trust sales proceeds attributable to the TIH for the calendar year on 
Form 1099. To determine the amount of trust sales proceeds attributable 
to a TIH for the calendar year, the trustee or middleman must aggregate 
the total amount of trust sales proceeds attributable to the TIH for 
each date on which the NMWHFIT sold or disposed of an asset or assets. 
To determine the total amount of trust sales proceeds attributable to a 
TIH for each date that the NMWHFIT sold or disposed of an asset or 
assets, the trustee or middleman multiplies the amount of trust sales 
proceeds received by the NMWHFIT per trust interest on that date by the 
number of trust interests held by the TIH on that date.
    (2) The written tax information statement furnished to the TIH. The 
written tax information statement required to be furnished to the TIH 
under paragraph (e) of this section must include a list of dates (in 
order, from earliest to latest) on which sales or dispositions of trust 
assets occurred during the calendar year and provide, for each date 
identified--
    (i) The trust sales proceeds received by the trust, per trust 
interest, with respect to the sales or dispositions of trust assets on 
that date; and
    (ii) The information provided by the trustee under paragraph 
(f)(1)(iv)(B)(2) of this section regarding the ratio of the assets sold 
or disposed of on that date to all the assets of the NMWHFIT held on 
that date, prior to such sale or disposition.
    (3) Calculating the total amount of trust sales proceeds 
distributed to the TIH. To determine the total amount of NMWHFIT 
distributions attributable to a TIH, the trustee or middleman must 
calculate the amount of trust sales proceeds distributed to the TIH for 
the calendar year. (See paragraph (f)(2)(ii)(A)(2)(v) of this section.) 
To determine the amount of trust sales proceeds distributed to a TIH 
for the calendar year, the trustee or middleman must aggregate the 
total amount of trust sales proceeds distributed to the TIH for each 
date on which the NMWHFIT distributed trust sales proceeds. To 
determine the total amount of trust sales proceeds distributed to a TIH 
for each date that the NMWHFIT distributed trust sales proceeds, the 
trustee or middleman must multiply the amount of trust sales proceeds 
distributed by the NMWHFIT per trust interest on that date by the 
number of trust interests held by the TIH on that date.
    (B) Reporting under the safe harbor if paragraph (c)(2)(iv)(B) of 
this section applies to the NMWHFIT. If paragraph (c)(2)(iv)(B) of this 
section applies, the trustee or middleman must calculate, in the manner 
provided in paragraph (f)(2)(iv)(A)(3) of this section, the amount of 
trust sales proceeds distributed to the TIH for the calendar year. The 
trustee or middleman must report this amount on the Form 1099 filed for 
the TIH and on the written tax information statement furnished to the 
TIH.
    (v) Reporting redemptions under the safe harbor--(A) Except as 
provided in paragraph (f)(2)(v)(B) or (C) of this section, if the 
trustee has provided a list of dates for which the amount of the 
redemption proceeds to be paid for the redemption of a trust interest 
was determined and the redemption asset proceeds paid for that date, 
the trustee or middleman must multiply the redemption asset proceeds 
determined per trust interest for that date by the number of trust 
interests redeemed by the TIH on that date.

[[Page 4018]]

    (B) If paragraph (c)(2)(v)(C) of this section applies, and the 
trustee has provided a list of dates for which the amount of the 
redemption proceeds to be paid for the redemption of a trust interest 
was determined and the redemption proceeds determined per trust 
interest on each date, the trustee or middleman must multiply the 
redemption proceeds per trust interest for each date by the number of 
trust interests redeemed by the TIH on that date.
    (C) If the trustee has provided the requesting person with 
information regarding the redemption asset proceeds paid for each 
redemption of a trust interest held by the middleman for the calendar 
year, or if paragraph (c)(2)(v)(C) of this section applies and the 
trustee has provided the amount of redemption proceeds paid for each 
redemption of a trust interest held by the middleman during the 
calendar year, the requesting person may use this information to 
determine the amount of the redemption asset proceeds or redemption 
proceeds paid to the TIH for the calendar year.
    (vi) Reporting sales of trust interests under the safe harbor--(A) 
Except as provided in paragraph (f)(2)(vi)(B) of this section, the 
trustee or middleman must subtract the amount of cash held for 
distribution per trust interest on the date of the sale from the sales 
proceeds paid to the TIH to determine the sale asset proceeds that are 
to be reported to the TIH for each sale of a trust interest.
    (B) If paragraph (c)(2)(v)(C) of this section applies, the trustee 
or middleman must report the sales proceeds paid to the TIH as a result 
of each sale of a trust interest.
    (vii) Reporting OID information under the safe harbor--The trustee 
or middleman must aggregate the amounts of OID that are allocable to 
each trust interest held by a TIH for each calculation period. The 
amount of OID that is allocable to a trust interest, with respect to 
each calculation period, is determined by multiplying--
    (A) The product of the OID factor and the original principal 
balance of the trust interest, divided by 1,000; by
    (B) The number of days during the OID calculation period in that 
calendar year that the TIH held the trust interest.
    (viii) Reporting market discount information under the safe 
harbor--(A) Except as provided in paragraph (f)(2)(viii)(B) of this 
section, the trustee or middleman must provide the TIH with the 
information provided under paragraph (f)(1)(vii)(B) of this section.
    (B) If paragraph (c)(2)(iv)(B) of this section applies, the trustee 
and middleman are not required under this paragraph (f)(2) to provide 
any information regarding market discount.
    (ix) Reporting bond premium information under the safe harbor. 
[Reserved]
    (3) Example of the use of the safe harbor for NMWHFITs. The 
following example illustrates the use of the factors in this paragraph 
(f) to calculate and provide NMWHFIT information:

    Example: (i) Facts--(A) In general--(1) Trust is a NMWHFIT that 
holds common stock in ten different corporations and has 100 trust 
interests outstanding. The start-up date for Trust is December 15, 
2006, and the termination date for Trust is March 15, 2008. The 
agreement governing Trust requires Trust to distribute the cash held 
by Trust reduced by accrued but unpaid expenses on April 15, July 
15, and October 15 of the 2007 calendar year. The agreement also 
provides that the trust interests will be redeemed by the Trust for 
an amount equal to the value of the trust interest, as of the close 
of business, on the day that the trust interest is tendered for 
redemption. There is no reinvestment plan. A secondary market for 
interests in Trust will be created by Trust's sponsor and Trust's 
sponsor will provide Trustee with a list of dates on which sales 
occurred on this secondary market.
    (2) As of December 31, 2006, Trust holds $12x for distribution 
to TIHs on the next distribution date and has no accrued but unpaid 
expenses. Trustee includes the $12x in determining the year-end cash 
allocation factor for December 31, 2006.
    (B) Events occurring during the 2007 calendar year--(1) As of 
January 1, 2007, Broker1 holds ten trust interests in Trust in 
street name for each of J and A and Broker2 holds ten trust 
interests in Trust in street name for S. J, A, and S; are 
individual, cash method taxpayers.
    (2) As of January 1, 2007, the fair market value of the Trust's 
assets equals $10,000x.
    (3) During 2007, Trust receives $588x in dividend income. 
Trustee determines that $400x of the dividend income received during 
2007 meets the definition of a qualified dividend in section 
1(h)(11)(B)(i) and the holding period requirement in section 
1(h)(11)(B)(iii) with respect to the Trust. During 2007, Trust also 
receives $12x in interest income from investment of Trust's funds 
pending distribution to TIHs, and pays $45x in expenses, all of 
which are affected expenses.
    (4) On April 15, 2007, Trustee distributes $135x, which includes 
the $12x included in determining the year-end cash allocation factor 
for December 31, 2006. As a result of the distribution, Broker1 
credits J's account and A's account for $13.50x each. Broker2 
credits S's account for $13.50x.
    (5) On June 1, 2007, Trustee sells shares of stock for $1000x to 
preserve the soundness of the trust. The stock sold on June 1, 2007, 
equaled 20% of the aggregate fair market value of the assets held by 
Trust on the start-up date of Trust.
    (6) On July 15, 2007, Trustee distributes $1,135x, which 
includes the $1,000x of trust sales proceeds received by Trust for 
the sale of assets on June 1, 2007. As a result of the distribution, 
Broker1 credits J's account and A's account for $113.50x each. 
Broker 2 credits S's account for $113.50x.
    (7) On September 30 2007, J, through Trust's sponsor, sells a 
trust interest to S for $115.35x. Trustee determines that the cash 
held for distribution per trust interest on September 30 is $1.35x. 
As a result of the sale, Broker1 credits J's account for $115.35x.
    (8) On October 15, 2007, Trustee distributes $123x. As a result 
of the distribution, Broker1 credits J's account for $11.07x and A's 
account for $12.30x. Broker2 credits S's account for $13.53x.
    (9) On December 10, 2007, J tenders a trust interest to Trustee 
for redemption through Broker1. Trustee determines that the amount 
of the redemption proceeds to be paid for a trust interest that is 
tendered for redemption on December 10, 2007, is $116x, of which 
$115x represents the redemption asset proceeds. On December 12, 
2007, Trustee sells shares of common stock for $115x to have 
sufficient cash to pay J's redemption proceeds. The stock sold on 
December 12, 2007, equaled 2% of the aggregate fair market value of 
all the assets of Trust as of the start up date. On December 17, 
2007, Trustee pays the $116x redemption proceeds (including the 
$115x trust sales proceeds received by Trust for the sale of the 
stock on December 12) to Broker1 on J's behalf, and Broker1 in turn 
pays $116x to J as redemption proceeds.
    (10) On December 10, 2007, J, through Trust's sponsor, also 
sells a trust interest to S for $116x. Trustee determines that the 
cash held for distribution per trust interest on that date is $1x. 
As a result of the sale, Broker1 credits J's account for $116x.
    (11) As of December 31, 2007, Trust holds cash of $173x and has 
incurred $15x in expenses that Trust has not paid. J is the only TIH 
to redeem a trust interest during the calendar year. The sale of two 
trust interests in Trust by J to S are the only sales that occurred 
on the secondary market established by Trust's sponsor during 2007.
    (ii) Trustee reporting--(A) Summary of information provided by 
Trustee. Trustee meets the requirements of paragraph (f)(1) of this 
section if Trustee provides the following information to requesting 
persons:
    (1) Income and expense information:

Factor for ordinary dividend income........  0.3481
Factor for qualified dividend income.......  0.7407
Factor for interest income.................  0.0222
Factor for affected expenses...............  0.0833
Current year-end cash allocation factor....  1.5960
Prior year cash allocation factor..........  0.1200
Prior year cash distribution date..........  April 15
 

    (2) Information regarding asset sales and distributions:

[[Page 4019]]



----------------------------------------------------------------------------------------------------------------
                                                                         Trust sales proceeds
              Date of sale                   Trust sales proceeds        distributed and date       Percent of
                                                   received                   distributed           trust sold
----------------------------------------------------------------------------------------------------------------
June 1..................................  $10.0000x.................  $10.0000x (July 15).......              20
December 12.............................  1.1616x...................  0.0000x...................               2
----------------------------------------------------------------------------------------------------------------

    (3) Information regarding redemptions:

------------------------------------------------------------------------
                                                            Redemption
                          Date                                 asset
                                                             proceeds
------------------------------------------------------------------------
December 10.............................................           $115x
------------------------------------------------------------------------

    (4) Information regarding sales of trust interests

------------------------------------------------------------------------
                                                           Cash held for
                                                           distribution
                          Date                               per trust
                                                             interest
------------------------------------------------------------------------
September 30............................................          $1.35x
December 10.............................................           1.00x
------------------------------------------------------------------------

    (B) Trustee determines this information as follows:
    (1) Step One: Trustee determines the total amount of NMWHFIT 
distributions for the calendar year. The total amount of NMWHFIT 
distributions (actual and deemed) for the calendar year for purposes 
of determining the safe harbor factors is $540x. This amount 
consists of the amounts paid on each scheduled distribution date 
during the calendar year ($1135x, $135x, and $123x), plus the total 
amount paid to J as a result of J's redemption of a trust interest 
($116x) ($1,135x + $135x + $123x + $116x = $1,509x)--
    (i) Increased by all cash held for distribution to TIHs as of 
December 31, 2007 ($158x), which is the cash held as of December 31, 
2007 ($173x) reduced by the accrued but unpaid expenses as of 
December 31, 2007 ($15x), and
    (ii) Decreased by all amounts distributed during the calendar 
year but included in the year-end cash allocation factor from a 
prior year ($12x); all redemption asset proceeds paid for the 
calendar year ($115x); and all trust sales proceeds distributed 
during the calendar year ($1,000x).
    (2) Step Two: Trustee determines factors that express the ratio 
of NMWHFIT income (other than OID) and expenses to the total amount 
of NMWHFIT distributions. Trustee determines the factors for each 
item of income earned by Trust and each item of expense as follows:
    (i) Ordinary dividend income factor. The ordinary dividend 
income factor is 0.3481, which represents the ratio of the gross 
amount of ordinary dividends ($188x) to the total amount of NMWHFIT 
distributions for the calendar year ($540x).
    (ii) Qualified dividend income factor. The qualified dividend 
income factor is 0.7407 which represents the ratio of the gross 
amount of qualified dividend income ($400x) to the total amount of 
NMWHFIT distributions for the calendar year ($540x).
    (iii) Interest income factor. The interest income factor is 
0.0222, which represents the ratio of the gross amount of interest 
income ($12x) to the total amount of NMWHFIT distributions for the 
calendar year ($540x).
    (iv) Expense factor. The affected expenses factor is 0.0833, 
which represents the ratio of the gross amount of affected expenses 
paid by Trust for the calendar year ($45x) to the total amount of 
NMWHFIT distributions for the calendar year ($540x).
    (3) Step Three: Trustee determines adjustments for reconciling 
the total amount of NMWHFIT distributions with amounts paid to TIHs. 
To enable requesting persons to determine the total amount of 
NMWHFIT distributions that are attributable to a TIH based on 
amounts actually paid to the TIH, the trustee must provide both a 
current year-end cash allocation factor and a prior year cash 
allocation factor.
    (i) Current year-end cash allocation factor. The adjustment 
factor for cash held by Trust at year end is 1.5960, which 
represents the cash held for distribution as of December 31, 2007 
($158x) (the amount of cash held by Trust on December 31, 2007 
($173x) reduced by accrued, but unpaid, expenses ($15x)), divided by 
the number of trust interests outstanding at year-end (99).
    (ii) Prior Year Cash Allocation Factor. The adjustment factor 
for distributions of year-end cash from the prior year is 0.1200, 
which represents the amount of the distribution during the current 
calendar year that was included in a year-end cash allocation factor 
for a prior year ($12x), divided by the number of trust interests 
outstanding at the time of the distribution (100). The prior year 
cash distribution date is April 15, 2007.
    (4) Reporting sales and dispositions of trust assets--(i) 
Application of the de minimis test and the qualified NMWHFIT 
exception. The aggregate fair market value of the assets of Trust as 
of January 1, 2007, was $10,000x. During the 2007 calendar year, 
Trust received trust sales proceeds of $1115x. Trust sales proceeds 
received by Trust for the 2007 calendar year equal 11.15% of Trust's 
fair market value as of January 1, 2007. Accordingly, neither the de 
minimis test or the qualified NMWHFIT exception is met for the 
calendar year.
    (ii) Information to be provided. To satisfy the requirements of 
paragraph (f)(1) of this section with respect to sales and 
dispositions of Trust's assets, Trustee provides a list of dates on 
which trust assets were sold during the calendar year, and provides, 
for each date: the trust sales proceeds (per trust interest) 
received on that date; the trust sales proceeds distributed to TIHs 
(per trust interest) with respect to sales or dispositions on that 
date; the date those trust sales proceeds were distributed, and the 
ratio of the assets sold or disposed of on that day to all the 
assets held by Trust. Because Trust will terminate within 15 months 
of its start-up date, Trustee must use the fair market value of the 
assets as of the start-up date to determine the portion of Trust 
sold or disposed of on any particular date.
    (5) Reporting redemptions. Because Trust is not required to make 
distributions at least as frequently as monthly, and Trust's start-
up date is after February 23, 2006, the exception in paragraph 
(c)(2)(v)(C) of this section does not apply to Trust. To satisfy the 
requirements of paragraph (f)(1) of this section, Trustee provides a 
list of dates for which the redemption proceeds to be paid for the 
redemption of a trust interest was determined for the 2007 calendar 
year and the redemption assets proceeds paid for each date. During 
2007, Trustee only determined the amount of redemption proceeds to 
be paid for the redemption of a trust interest once, for December 
10, 2007, and the redemption asset proceeds determined for that date 
was $115x.
    (6) Reporting sales of trust interest. Because Trust is not 
required to make distributions at least as frequently as monthly, 
and Trust's start up date is after February 23, 2006, the exception 
in paragraph (c)(2)(v)(C) of this section does not apply to Trust. 
Sponsor, in accordance with the trust agreement, provides Trustee 
with a list of dates on which sales on the secondary market 
occurred. To satisfy the requirements of paragraph (f)(1) of this 
section, Trustee provides requesting persons with a list of dates on 
which sales on the secondary market occurred and the amount of cash 
held for distribution per trust interest on each date. During 2007, 
two sales occurred on the secondary market. The first sale occurred 
on September 30, 2007, and the amount of cash held for distribution, 
per trust interest, on that date is $1.35x. The second sale occurred 
on December 10, 2007, and the amount of cash held for distribution, 
per trust interest, on that date is $1.00x.
    (iii) Brokers' use of information provided by Trustee. (A) 
Broker1 and Broker2 use the information furnished by Trustee under 
the safe harbor to determine that the following items are 
attributable to J, A, and S--

With respect to J
    Ordinary Dividend Income............................         $17.89x
    Qualified Dividend Income...........................          38.07x
    Interest Income.....................................           1.14x
    Affected Expenses...................................           4.28x
    Trust sales proceeds reported on Form 1099..........         108.13x

[[Page 4020]]

 
    Redemption asset proceeds
        For redemption on December 10...................         115.00x
    Sale asset proceeds
        For sale on September 30........................         114.00x
        For sale on December 10.........................         115.00x
With respect to A
    Ordinary Dividend Income............................          18.82x
    Qualified Dividend Income...........................          40.04x
    Interest Income.....................................           1.20x
    Affected Expenses...................................           4.50x
    Trust sales proceeds reported on Form 1099..........          11.62x
With respect to S
    Ordinary Dividend Income............................          19.54x
    Qualified Dividend Income...........................          41.58x
    Interest Income.....................................           1.25x
    Affected Expenses...................................           4.68x
    Trust sales proceeds reported on Form 1099..........         113.94x
 

    With respect to J, A, and S (regarding the sales and 
dispositions executed by Trust during the calendar year)

------------------------------------------------------------------------
                                      Trust sales proceeds
                Date                   received per trust     Percent of
                                            interest          trust sold
------------------------------------------------------------------------
June 15............................  $10.0000x.............           20
December 12........................  1.1616x...............            2
------------------------------------------------------------------------

    (B) The brokers determine the information provided to J, A, and 
S as follows--
    (1) Step One: Brokers determine the total amount of NMWHFIT 
distributions attributable to J, A, and S. Broker1 determines that 
the total amount of NMWHFIT distributions attributable to J is 
$51.39x and the total amount of NMWHFIT distributions attributable 
to A is $54.06x. Broker2 determines that the total amount of NMWHFIT 
distributions attributable to S is $56.13x.
    (i) To calculate these amounts the brokers begin by determining 
the total amount paid to J, A, and S for the calendar year--
    (A) The total amount paid to J for the calendar year equals 
$485.42x and includes the April 15, 2007, distribution of $13.50x, 
the July 15, 2007, distribution of $113.50x, the sales proceeds for 
the September 30, 2007, sale of $115.35x, the October 15, 2007, 
distribution of $11.07x, and the redemption proceeds of $116x and 
sales proceeds of $116x for the redemption and sale on December 10, 
2007.
    (B) The total amount paid to A for the calendar year equals 
$139.30x and includes the April 15, 2007, distribution of $13.50x, 
the July 15, 2007, distribution of $113.50x and the October 15, 
2007, distribution of $12.30x.
    (C) The total amount paid to S for the calendar year equals 
$140.53x and includes the April 15, 2007, distribution of $13.50x, 
the July 15, 2007, distribution of $113.50x and the October 15, 
2007, distribution of $13.53x.
    (ii) The brokers increase the total amount paid to J, A, and S 
by an amount equal to the current year-end cash allocation factor 
(1.5960) multiplied by the number of trust interests held by J (7), 
A (10), and S (12) as of December 31, 2007; that is for J, $11.17x; 
for A, $15.96x; and for S, $19.15x.
    (iii) The brokers reduce the amount paid to J, A, and S as 
follows--
    (A) An amount equal to the prior year cash allocation factor 
(0.1200), multiplied by the number of trust interests held by J 
(10), A (10), and S (10) on the date of the prior year cash 
distribution; that is for J, A, and S, $1.20x, each;
    (B) An amount equal to all redemption asset proceeds paid to a 
TIH for the calendar year; that is, for J, $115x;
    (C) An amount equal to all sales asset proceeds attributable to 
the TIH for the calendar year; that is for J, $229x (for the 
September 30, 2007, sale: $115.35x-1.35x (cash held for distribution 
per trust interest on that date)-$114x; and for the December 10, 
2007, sale: $116x-1.00 (cash held for distribution per trust 
interest on that date)=$115x));
    (D) In the case of a purchasing TIH, an amount equal to the 
amount of cash held for distribution per trust interest at the time 
the TIH purchased its trust interest, multiplied by the number of 
trust interests purchased; that is for S, $2.35x ($1.35x with 
respect to the September 30, 2007, sale and $1x with respect to the 
December 10, 2007, sale);
    (E) All amounts of trust sales proceeds distributed to the TIH 
for the calendar year; that is for J, A, and S, $100. ($100 each, 
with respect to the June 15, 2007, sale of assets by Trust, and $0 
each, with respect to the December 12, 2007, sale of assets by 
Trust).
    (2) Step two: The brokers apply the factors provided by Trustee 
to determine the Trust's income and expenses that are attributable 
to J, A, and S. The amounts of each item of income (other than OID) 
and expense that are attributable to J, A, and S are determined by 
multiplying the factor for that type of income or expense by the 
total amount of NMWHFIT distributions attributable to J, A, and S as 
follows:
    (i) Application of factor for ordinary dividends. The amount of 
ordinary dividend income attributable to J is $17.89x, to A is 
$18.82x, and to S is $19.54x. The brokers determine these amounts by 
multiplying the total amount of NMWHFIT distributions attributable 
to J, A, and S ($51.39x, $54.06x, and $56.13x, respectively) by the 
factor for ordinary dividends (0.3481).
    (ii) Application of factor for qualified dividend income. The 
amount of qualified dividend income attributable to J is $38.07x, to 
A is $40.04x, and to S is $41.58x. The brokers determine these 
amounts by multiplying the total amount of NMWHFIT distributions 
attributable to J, A, and S ($51.39x, $54.06x, and $56.13x, 
respectively) by the factor for qualified dividends (0.7407).
    (iii) Application of factor for interest income. The amount of 
interest income attributable to J is $1.14x, to A is $1.20x, and to 
S is $1.25x. The brokers determine these amounts by multiplying the 
total amount of NMWHFIT distributions attributable to J, A, and S 
($51.39x, $54.06x, and $56.13x, respectively) by the factor for 
interest (0.0222).
    (iv) Application of factor for affected expenses. The amount of 
affected expenses attributable to J is $4.28x, to A is $4.50x, and 
to S is $4.68x. The brokers determine these amounts by multiplying 
the total amount of NMWHFIT distributions attributable to J, A, and 
S ($51.39x, $54.06x, and $56.13x, respectively) by the factor for 
affected expenses (0.0833).
    (3) Brokers reporting of sales and dispositions of trust 
assets--(i) Determining the amount of trust sales proceeds to be 
reported on Form 1099 for J, A, and S. The amount of trust sales 
proceeds to be reported on Form 1099 with respect to J is $108.13x, 
to A is $111.62x, and to S is $113.94x. To determine these amounts, 
the brokers aggregate the amount of trust sales proceeds 
attributable to J, A, and S for each date on which Trust sold or 
disposed of assets. The brokers determine the amount of trust sales 
proceeds to be reported with respect to the June 15, 2007, asset 
sale by multiplying the number of trust interests held by J (10), A 
(10) and S (10) on that date by the trust sales proceeds received 
per trust interest on that date ($10x). The brokers determine the 
amount of trust sales proceeds to be reported with respect to the 
December 12, 2007, asset sale by multiplying the number of trust 
interests held by J (7), A (10) and S (12) on that date by the trust 
sales proceeds received per trust interest on that date ($1.1616x).
    (ii) Information provided on the tax information statements 
furnished to J, A, and S. The tax information statements furnished 
to J, A, and S must include the dates of each sale or disposition 
(June 15, 2007, and December 12, 2007); the amount of trust sales 
proceeds per trust interest received on those dates ($10.00x and 
$1.1616x, respectively); and, the percentage of Trust sold or 
disposed of on that date (20% and 2%, respectively).
    (4) Reporting redemptions. Broker1 reports on Form 1099 and on 
the written tax

[[Page 4021]]

information statement furnished to J that J received $115x in 
redemption asset proceeds for the calendar year.
    (5) Reporting sales of trust interests on the secondary market. 
Broker1 reports on J's two sales of trust interests. With respect to 
the sale on September 30, 2007, the sale asset proceeds equals $114x 
($115.35x sale proceeds--$1.35x cash held for distribution on that 
date) and with respect to the sale on December 10, 2007, the sale 
asset proceeds equal $115x ($116x sale proceeds--$1x cash held for 
distribution on that date). Broker1 reports these amounts on Form 
1099 and on the tax information statement furnished to J.

    (g) Safe Harbor for certain WHMTs--(1) Safe harbor for trustee of 
certain WHMTs for reporting information--(i) In general. The trustee of 
a WHMT that meets the requirements of paragraph (g)(1)(ii) 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 (g) and provides a statement to the 
requesting person giving notice that information has been calculated in 
accordance with this paragraph (g)(1).
    (ii) Requirements. A WHMT must meet the following requirements--
    (A) The WHMT must make monthly distributions of the income and 
principal payments received by the WHMT to its TIHs;
    (B) All trust interests in the WHMT must represent the right to 
receive an equal pro-rata share of both the income and the principal 
payments received by the WHMT on the mortgages it holds (for example, a 
WHMT that holds or issues trust interests that qualify as stripped 
interests under section 1286 may not report under this safe harbor);
    (C) The WHMT must--
    (1) Report under this paragraph (g)(1)(ii) for the life of the 
WHMT; or
    (2) If the WHMT has a start-up date before January 1, 2007, the 
WHMT must begin reporting under this paragraph (g)(1)(ii) as of January 
1, 2007, and must continue to report under this paragraph for the life 
of the WHMT;
    (D) The WHMT must calculate all items subject to the safe harbor 
consistent with the safe harbor;
    (E) The assets of the WHMT must be limited to--
    (1) Mortgages with uniform characteristics;
    (2) Reasonably required reserve funds; and
    (3) Amounts received on mortgages or reserve funds and held for 
distribution to TIHs; and
    (F) The aggregate outstanding principal balance (as defined in 
paragraph (g)(1)(iii)(D) of this section) as of the WHMT's start-up 
date must equal the aggregate of the original face amounts of all 
issued trust interests.
    (iii) Reporting WHMT income, expenses, non pro-rata partial 
principal payments, and sales and dispositions under the safe harbor. A 
trustee must comply with each step provided in this paragraph 
(g)(1)(iii).
    (A) Step One: Determine monthly pool factors. The trustee must, for 
each month of the calendar year and for January of the following 
calendar year, calculate and provide the ratio (expressed as a decimal 
carried to at least eight places and called a pool factor) of--
    (1) The amount of the aggregate outstanding principal balance of 
the WHMT as of the first business day of the month; to
    (2) The amount of the aggregate outstanding principal balance of 
the WHMT as of the start-up date.
    (B) Step Two: Determine monthly expense factors. For each month of 
the calendar year and for each item of expense paid by the WHMT during 
that month, the trustee must calculate and provide the ratio (expressed 
as a decimal carried to at least eight places and called an expense 
factor) of--
    (1) The gross amount, for the month, of each item of expense; to
    (2) The amount that represents the aggregate outstanding principal 
balance of the WHMT as of the start-up date, divided by 1,000.
    (C) Step Three: Determine monthly income factors. For each month of 
the calendar year and for each item of gross income earned by the WHMT 
during that month, the trustee must calculate and provide the ratio 
(expressed as a decimal carried to at least eight places and called an 
income factor) of--
    (1) The gross amount, for the month, of each item of income, to
    (2) The amount that represents the aggregate outstanding principal 
balance of the WHMT as of the start-up date, divided by 1,000.
    (D) Definition of aggregate outstanding principal balance. For 
purposes of this paragraph (g)(1)(iii), the amount of the aggregate 
outstanding principal balance of a WHMT is the aggregate of--
    (1) The outstanding principal balance of all mortgages held by the 
WHMT;
    (2) The amounts received on mortgages as principal payments and 
held for distribution by the WHMT; and
    (3) The amount of the reserve fund (exclusive of undistributed 
income).
    (iv) Reporting OID information under the safe harbor--(A) Reporting 
OID prior to the issuance of final regulations under section 
1272(a)(6)(C)(iii)--(1) For calendar years prior to the effective date 
of final regulations under section 1272(a)(6)(C)(iii), the trustee must 
provide, for each month during the calendar year, the aggregate daily 
accrual of OID per $1,000 of aggregate outstanding principal balance as 
of the start-up date (daily portion). For purposes of this paragraph 
(g)(1)(iv), the daily portion of OID is determined by allocating to 
each day of the month its ratable portion of the excess (if any) of--
    (i) The sum of the present value (determined under section 
1272(a)(6)(B)) of all remaining payments under the mortgages held by 
the WHMT at the close of the month, and the payments during the month 
of amounts included in the stated redemption price of the mortgages, 
over
    (ii) The aggregate of each mortgage's adjusted issue price as of 
the beginning of the month.
    (2) In calculating the daily portion of OID, the trustee must use 
the prepayment assumption used in pricing the original issue of trust 
interests.
    (B) Reporting OID after the issuance of final regulations under 
section 1272(a)(6)(C)(iii). [Reserved.]
    (v) Reporting market discount information under the safe harbor-- 
(A) Reporting market discount information prior to the issuance of 
final regulations under sections 1272(a)(6)(C)(iii) and 1276(b)(3). For 
calendar years prior to the effective date of final regulations under 
sections 1272(a)(6)(C)(iii) and 1276(b)(3), the trustee must provide--
    (1) In the case of a WHMT holding mortgages issued with OID, the 
ratio (expressed as a decimal carried to at least eight places) of--
    (i) The OID accrued during the month (calculated in accordance with 
paragraph (g)(1)(iv) of this section); to
    (ii) The total remaining OID as of the beginning of the month (as 
determined under paragraph (g)(1)(v)(A)(3) of this section); or
    (2) In the case of a WHMT holding mortgages issued without OID, the 
ratio (expressed as a decimal carried to at least eight places) of--
    (i) The amount of stated interest paid to the WHMT during the 
month; to
    (ii) The total amount of stated interest remaining to be paid to 
the WHMT as of the beginning of the month (as determined under 
paragraph (g)(1)(v)(A)(3) of this section).
    (3) Computing the total amount of stated interest remaining to be 
paid and the total remaining OID at the beginning of a month. To 
compute the total amount of stated interest remaining to be paid to the 
WHMT as of the beginning of the month and the total remaining OID as of 
the beginning of the month, the trustee must use the prepayment 
assumption used in pricing the original issue of unit interests.

[[Page 4022]]

    (B) Reporting market discount information under the safe harbor 
following the issuance of final regulations under sections 
1272(a)(6)(C)(iii) and 1276(b)(3). [Reserved.]
    (vi) Reporting bond premium information under the safe harbor. 
[Reserved.]
    (2) Use of information provided by a trustee under the safe 
harbor--(i) In general. If a trustee reports WHMT items in accordance 
with paragraph (g)(1) of this section, the information provided with 
respect to those items on the Forms 1099 required to be filed with the 
IRS under paragraph (d) of this section and on the statement required 
to be furnished to the TIH under paragraph (e) of this section must be 
determined as provided in this paragraph (g)(2).
    (ii) Reporting WHMT income, expenses, non pro-rata partial 
principal payments, and sales and dispositions under the safe harbor. 
The amount of each item of income, the amount of each item of expense, 
and the combined amount of non pro-rata partial principal payments and 
trust sales proceeds that are attributable to a TIH for each month of 
the calendar year must be computed as follows:
    (A) Step One: Determine the aggregate of the non pro-rata partial 
principal payments and trust sales proceeds that are attributable to 
the TIH for the calendar year. For each month of the calendar year that 
a trust interest was held on the record date--
    (1) Determine the monthly amounts per trust interest. The trustee 
or middleman must determine the aggregate amount of non pro-rata 
partial principal payments and the trust sales proceeds that are 
attributable to each trust interest for each month by multiplying--
    (i) The original face amount of the trust interest; by
    (ii) The difference between the pool factor for the current month 
and the pool factor for the following month.
    (2) Determine the amount for the calendar year. The trustee or 
middleman must multiply the monthly amount per trust interest by the 
number of trust interests held by the TIH on the record date of each 
month. The trustee or middleman then must aggregate these monthly 
amounts, and report the aggregate amount on the Form 1099 filed with 
the IRS and on the tax information statement furnished to the TIH as 
trust sales proceeds. No other information is required to be reported 
to the IRS or the TIH to satisfy the requirements of paragraphs (d) and 
(e) of this section under this paragraph (g) with respect to sales and 
dispositions and non pro-rata partial principal payments.
    (B) Step Two: Determine the amount of each item of expense that is 
attributable to a TIH--(1) Determine the monthly amounts per trust 
interest. For each month of the calendar year that a trust interest was 
held on the record date, the trustee or middleman must determine the 
amount of each item of expense that is attributable to each trust 
interest by multiplying--
    (i) The original face amount of the trust interest, divided by 
1000; by
    (ii) The expense factor for that month and that item of expense.
    (2) Determine the amount for the calendar year. The trustee or 
middleman must multiply the monthly amount of each item of expense per 
trust interest by the number of trust interests held by the TIH on the 
record date of each month. The trustee or middleman then must aggregate 
the monthly amounts for each item of expense to determine the total 
amount of each item of expense that is attributable to the TIH for the 
calendar year.
    (C) Step Three: Determine the amount of each item of income that is 
attributable to the TIH for the calendar year--(1) Determine the 
monthly amounts per trust interest. For each month of the calendar year 
that a trust interest was held on the record date, the trustee or 
middleman must determine the amount of each item of income that is 
attributable to each trust interest by multiplying--
    (i) The original face amount of the trust interest, divided by 
1,000; by
    (ii) The income factor for that month and that item of income.
    (2) Determine the amount for the calendar year. The trustee or 
middleman must multiply the monthly amount of each item of income per 
trust interest by the number of trust interests held by the TIH on the 
record date of each month. The trustee or middleman then must aggregate 
the monthly amounts for each item of income to determine the total 
amount of each item of income that is attributable to the TIH for the 
calendar year.
    (D) Definitions for this paragraph (g)(2). For purposes of this 
paragraph (g)(2)(ii)--
    (1) The record date is the date used by the WHMT to determine the 
owner of the trust interest for the purpose of distributing the payment 
for the month.
    (2) The original face amount of the trust interest is the original 
principal amount of a trust interest on its issue date.
    (iii) Reporting OID information under the safe harbor. With respect 
to each month, trustee or middleman must determine the amount of OID 
that is attributable to each trust interest held by a TIH by 
multiplying--
    (A) The product of the OID factor multiplied by the original face 
amount of the trust interest, divided by 1,000; by
    (B) The number of days during the month that the TIH held the trust 
interest.
    (iv) Requirement to provide market discount information under the 
safe harbor. The trustee or middleman must provide the market discount 
information in accordance with paragraph (g)(1)(v) of this section to 
the TIH in, or with, the written statement required to be furnished to 
the TIH under paragraph (e) of this section.
    (v) Requirement to provide bond premium information under the safe 
harbor. [Reserved]
    (3) Example of safe harbor in paragraph (g)(1) of this section. The 
following example illustrates the use of the factors in this paragraph 
(g) to calculate and provide WHMT information:

    Example. (i) Facts--(A) In general. X is a WHMT. X's start-up 
date is January 1, 2007. As of that date, X's assets consist of 100 
15-year mortgages, each having an unpaid principal balance of 
$125,000 and a fixed, annual interest rate of 7.25 percent. None of 
the mortgages were issued with OID. X's TIHs are entitled to 
monthly, pro-rata distributions of the principal payments received 
by X. X's TIHs are also entitled to monthly, pro-rata distributions 
of the interest earned on the mortgages held by X, reduced by 
expenses. Trust interests are issued in increments of $5,000 with a 
$25,000 minimum. The prepayment assumption used in pricing the 
original issue of trust interests is six percent. Broker holds a 
trust interest in X, with an original face amount of $25,000, in 
street name, for C during the entire 2007 calendar year.
    (B) Trust events during the 2007 calendar year. During the 2007 
calendar year, X collects all interest and principal payments when 
due and makes all monthly distributions when due. One mortgage is 
repurchased from X in July 2007 for $122,249, the mortgage's unpaid 
principal balance plus accrued, but unpaid, interest at the time. 
During November 2007, another mortgage is prepaid in full. X earns 
$80 interest income each month from the temporary investment of X's 
funds pending distribution to the TIHs. All of X's expenses are 
affected expenses. The aggregate outstanding principal balance of 
X's mortgages, X's interest income, and X's expenses, for each month 
of the 2007 calendar year, along with the aggregate outstanding 
principal balance of X as of January 2008, are as follows:

[[Page 4023]]



----------------------------------------------------------------------------------------------------------------
                                                                     Principal
                              Month                                   balance         Income         Expenses
----------------------------------------------------------------------------------------------------------------
January.........................................................     $12,500,000         $75,601          $5,288
February........................................................      12,461,413          75,368           5,273
March...........................................................      12,422,593          75,133           5,256
April...........................................................      12,383,538          74,897           5,240
May.............................................................      12,344,247          74,660           5,244
June............................................................      12,304,719          74,421           5,207
July............................................................      12,264,952          74,181           5,191
August..........................................................      12,102,696          73,200           5,122
September.......................................................      12,062,849          72,960           5,106
October.........................................................      12,022,762          72,718           5,089
November........................................................      11,982,432          72,474           5,073
December........................................................      11,821,234          71,500           5,006
January.........................................................      11,780,829  ..............  ..............
----------------------------------------------------------------------------------------------------------------

    (ii) Trustee reporting. (A) Trustee, X's fiduciary, comes within 
the safe harbor of paragraph (g)(1)(ii) of this section by providing 
the following information to requesting persons:

----------------------------------------------------------------------------------------------------------------
                              Month                                 Pool factor    Income factor  Expense factor
----------------------------------------------------------------------------------------------------------------
January.........................................................      1.00000000      6.04806667      0.42304000
February........................................................      0.99691304      6.02941628      0.42184000
March...........................................................      0.99380744      6.01065328      0.42048000
April...........................................................      0.99068304      5.99177670      0.41920000
May.............................................................      0.98753976      5.97278605      0.41952000
June............................................................      0.98437752      5.95368085      0.41656000
July............................................................      0.98119616      5.93446013      0.41528000
August..........................................................      0.96821564      5.85603618      0.40976000
September.......................................................      0.96502792      5.83677704      0.40848000
October.........................................................      0.96182096      5.81740161      0.40712000
November........................................................      0.95859459      5.79790896      0.40584000
December........................................................      0.94569875      5.71999659      0.40048000
January.........................................................      0.94246631  ..............  ..............
----------------------------------------------------------------------------------------------------------------

    (B) Trustee determines this information as follows:
    (1) Step One: Trustee determines monthly pool factors. Trustee 
calculates and provides X's pool factor for each month of the 2007 
calendar year. For example, for the month of January 2007 the pool 
factor is 1.0, which represents the ratio of --
    (i) The amount that represents the aggregate outstanding 
principal balance of X ($12,500,000) as of the first business day of 
January; divided by
    (ii) The amount that represents the aggregate outstanding 
principal balance of X ($12,500,000) as of the start-up day.
    (2) Step Two: Trustee determines monthly expense factors. 
Trustee calculates and provides the expense factors for each month 
of the 2007 calendar year. During 2007, X has only affected 
expenses, and therefore, will have only one expense factor for each 
month. For example, the expense factor for the month of January 2007 
is 0.42304000, which represents the ratio of--
    (i) The gross amount of expenses paid during January by X 
($5,288); divided by
    (ii) The amount that represents the aggregate outstanding 
principal balance of X as of the start-up date ($12,500,000) divided 
by 1,000 ($12,500).
    (3) Step Three: Trustee determines monthly income factors. 
Trustee calculates and provides the income factors for each month of 
the 2007 calendar year. During 2007, X has only interest income, and 
therefore, will have only one income factor for each month. For 
example, the income factor for the month of January 2007 is 
6.04806667, which represents the ratio of--
    (i) The gross amount of interest income earned by X during 
January ($75,601); divided by
    (ii) The amount that represents that aggregate outstanding 
principal balance of X as of the start-up date ($12,500,000), 
divided by 1,000 ($12,500).
    (4) Step Four: Trustee calculates and provides monthly market 
discount fractions. Trustee calculates and provides a market 
discount fraction for each month of the 2007 calendar year using a 
prepayment assumption of 6% and a stated interest rate of 7.25%.
    (iii) Broker's use of the information provided by Trustee. (A) 
Broker uses the information provided by Trustee under paragraph (g) 
of this section to determine that the following trust items are 
attributable to C:

----------------------------------------------------------------------------------------------------------------
                                                                     Aggregate
                                                                    trust sales
                                                                   proceeds and
                              Month                                non pro-rata      Affected     Gross interest
                                                                      partial        expenses         income
                                                                     principal
                                                                     payments
----------------------------------------------------------------------------------------------------------------
January.........................................................          $77.17          $10.58         $151.20
February........................................................           77.64           10.55          150.74
March...........................................................           78.11           10.51          150.27
April...........................................................           78.58           10.48          149.79
May.............................................................           79.06           10.49          149.32
June............................................................           79.53           10.41          148.84
July............................................................          324.51           10.38          148.36
August..........................................................           79.69           10.24          146.40

[[Page 4024]]

 
September.......................................................           80.17           10.21          145.92
October.........................................................           80.66           10.18          145.43
November........................................................          322.40           10.15          144.95
December........................................................           80.81           10.01          143.00
                                                                 -----------------
    Total.......................................................         1438.33          124.19         1774.22
----------------------------------------------------------------------------------------------------------------

    (B) Broker determines this information as follows:
    (1) Step One: Broker determines the amount of the non pro-rata 
partial principal payments and trust sales proceeds received by X 
that are attributable to C for the 2007 calendar year. Broker 
determines the amount of the non pro-rata partial principal payments 
and trust sales proceeds received by X that are attributable to C 
for each month of the 2007 calendar year. For example, for the month 
of January, Broker determines that the amount of principal receipts 
and the amount of trust sales proceeds that are attributable to C is 
$77.17. Broker determines this by multiplying the original face 
amount of C's trust interest ($25,000) by 0.00308696, the difference 
between the pool factor for January 2007 (1.00000000) and the pool 
factor for the following month of February 2007 (0.99691304). Broker 
reports the aggregate of the monthly amounts of non pro-rata partial 
principal payments and trust sales proceeds that are attributable to 
C for the 2007 calendar year as trust sales proceeds on the Form 
1099 filed with the IRS.
    (2) Step Two: Broker applies the expense factors provided by 
Trustee to determine the amount of expenses that are attributable to 
C for the 2007 calendar year. Broker determines the amount of X's 
expenses that are attributable to C for each month of the calendar 
year. For example, for the month of January 2007, Broker determines 
that the amount of expenses attributable to C is $10.58. Broker 
determines this by multiplying the original face amount of C's trust 
interest ($25,000), divided by 1,000 ($25) by the expense factor for 
January 2007 (0.42304000). Broker determines the expenses that are 
attributable to C for the 2007 calendar year by aggregating the 
monthly amounts.
    (3) Step Three: Broker applies the income factors provided by 
Trustee to determine the amount of gross interest income 
attributable to C for the 2007 calendar year. Broker determines the 
amount of gross interest income that is attributable to C for each 
month of the calendar year. For example, for the month of January 
2007, Broker determines that the amount of gross interest income 
attributable to C is $151.20. Broker determines this by multiplying 
the original face amount of C's trust interest ($25,000), divided by 
1,000 ($25), by the income factor for January 2007 (6.04806667). 
Broker determines the amount of the gross interest income that is 
attributable to C for the 2007 calendar year by aggregating the 
monthly amounts.
    (4) Step Four: Broker provides market discount information to C. 
Broker provides C with the market discount fractions calculated and 
provided by the trustee of X under paragraph (g)(3)(ii)(D) of this 
section.

    (h) Requirement that middlemen furnish information to beneficial 
owners that are exempt recipients and noncalendar-year beneficial 
owners--(1) In general. A middleman that holds a trust interest on 
behalf of, or for the account of, either a beneficial owner that is an 
exempt recipient defined in paragraph (b)(7) of this section or a 
noncalendar-year beneficial owner, must provide to such beneficial 
owner, upon request, the information provided by the trustee to the 
middleman under paragraph (c) of this section.
    (2) Time for providing information. The middleman must provide the 
requested information to any beneficial owner making a request under 
paragraph (h)(1) of this section on or before the later of the 44th day 
after the close of the calendar year for which the information was 
requested, or the day that is 28 days after the receipt of the request. 
A middleman must provide information with respect to a WHFIT holding an 
interest in another WHFIT, or a WHFIT holding an interest in a REMIC, 
on or before the later of the 58th day after the close of the calendar 
year for which the information was requested, or the 42nd day after the 
receipt of the request.
    (3) Manner of providing information. The requested information must 
be provided--
    (i) By written statement sent by first class mail to the address 
provided by the person requesting the information;
    (ii) By electronic mail provided that the person requesting the 
information requests that the middleman furnish the information by 
electronic mail and the person furnishes an electronic address;
    (iii) At an Internet website of the middleman or the trustee, 
provided that the beneficial owner requesting the information is 
notified that the requested information is available at the Internet 
website and is furnished the address of the site; or
    (iv) Any other manner agreed to by the middleman and the beneficial 
owner requesting the information.
    (4) Clearing organization. A clearing organization described in 
Sec.  1.163-5(c)(2)(i)(D)(8) is not required to furnish information to 
exempt recipients or non-calendar-year TIHs under this paragraph (h).
    (i) [Reserved.]
    (j) Coordination with other information reporting rules. In 
general, in cases in which reporting is required for a WHFIT under both 
this section and subpart B, part III, subchapter A, chapter 61 of the 
Internal Revenue Code (Sections 6041 through 6050S) (Information 
Reporting Sections), the reporting rules for WHFITs under this section 
must be applied. The provisions of the Information Reporting Sections 
and the regulations thereunder are incorporated into this section as 
applicable, but only to the extent that such provisions are not 
inconsistent with the provisions of this section.
    (k) Backup withholding requirements. Every trustee and middleman 
required to file a Form 1099 under this section is a payor within the 
meaning of Sec.  31.3406(a)-2, and must backup withhold as required 
under section 3406 and any regulations thereunder.
    (l) Penalties for failure to comply. Every trustee and middleman 
who fails to comply with the reporting obligations imposed by this 
section is subject to penalties under sections 6721, 6722, and any 
other applicable penalty provisions.
    (m) Effective date. These regulations are applicable January 1, 
2007. Trustees must calculate and provide trust information with 
respect to the 2007 calendar year and all subsequent years consistent 
with these regulations. Information returns required to be filed with 
the IRS and the tax information statements required to be furnished to 
trust interest holders after December 31, 2007 must be consistent with 
these regulations.

0
Par. 4. Section 1.6041-9 is added to read as follows:

[[Page 4025]]

Sec.  1.6041-9  Coordination with reporting rules for widely held fixed 
investment trusts under Sec.  1.671-5.

    See Sec.  1.671-5 for the reporting rules for widely held fixed 
investment trusts (WHFIT) (as defined under that section). For purposes 
of section 6041, middlemen and trustees of WHFITs are deemed to have 
management and oversight functions in connection with payments made by 
the WHFIT.
0
Par. 5. Section 1.6042-5 is added to read as follows:


Sec.  1.6042-5  Coordination with reporting rules for widely held fixed 
investment trusts under Sec.  1.671-5.

    See Sec.  1.671-5 for the reporting rules for widely held fixed 
investment trusts (as defined under that section).

0
Par. 6. Section 1.6045-1 is amended by adding paragraph (d)(7) to read 
as follows:


Sec.  1.6045-1  Returns of information of brokers and barter exchanges.

* * * * *
    (d) * * *
    (7) Coordination with reporting rules for widely held fixed 
investment trusts under Sec.  1.671-5 of this chapter. See Sec.  1.671-
5 for the reporting rules for widely held fixed investment trusts (as 
defined under that section).
* * * * *

0
Par. 7. Section 1.6049-4 is amended by adding paragraph (c)(3) to read 
as follows:


Sec.  1.6049-4  Return of information as to interest paid and original 
issue discount includible in gross income after December 31, 1982.

* * * * *
    (c) * * *
    (3) Coordination with reporting rules for widely held fixed 
investment trusts under Sec.  1.671-5 of this chapter. See Sec.  1.671-
5 for the reporting rules for widely held fixed investment trusts (as 
defined under that section).
* * * * *

0
Par. 8. In Sec.  1.6049-5, paragraph (a)(6) is revised to read as 
follows:


Sec.  1.6049-5  Interest and original issue discount subject to 
reporting after December 31, 1982.

    (a) * * *
    (6) Interest paid on amounts held by investment companies as 
defined in section 3 of the Investment Company Act (15 U.S.C. section 
80-a) and on amounts paid on pooled funds or trusts. The interest to be 
reported with respect to a widely held fixed investment trust, as 
defined in Sec.  1.671-5(b)(22), shall be the interest earned on the 
assets held by the trust. See Sec.  1.671-5 for the reporting rules for 
widely held fixed investment trusts (as defined under that section).
* * * * *

0
Par. 9. Section 1.6050N-2 is added to read as follows:


Sec.  1.6050N-2  Coordination with reporting rules for widely held 
fixed investment trusts under Sec.  1.671-5.

    See Sec.  1.671-5 for the reporting rules for widely held fixed 
investment trusts (as defined under that section).

PART 301--PROCEDURE AND ADMINISTRATION

0
Par. 10. The authority citation for part 301 continues to read, in 
part, as follows:

    Authority: 26 U.S.C. 7805 * * *


0
Par. 11. Section 301.6109-1 is amended by:
0
1. Revising the heading to paragraph (a)(2).
0
2. Revising paragraph (a)(2)(i).
    The revisions read as follows:


Sec.  301.6109-1  Identifying numbers.

    (a) * * *
    (2) A trust that is treated as owned by one or more persons 
pursuant to sections 671 through 678--(i) Obtaining a taxpayer 
identification number--(A) General rule. Unless the exception in 
paragraph (a)(2)(i)(B) of this section applies, a trust that is treated 
as owned by one or more persons under sections 671 through 678 must 
obtain a taxpayer identification number as provided in paragraph (d)(2) 
of this section.
    (B) Exception for a trust all of which is treated as owned by one 
grantor or one other person and that reports under Sec.  1.671-
4(b)(2)(i)(A) of this chapter. A trust that is treated as owned by one 
grantor or one other person under sections 671 through 678 need not 
obtain a taxpayer identification number, provided the trust reports 
pursuant to Sec.  1.671-4(b)(2)(i)(A) of this chapter. The trustee must 
obtain a taxpayer identification number as provided in paragraph (d)(2) 
of this section for the first taxable year that the trust is no longer 
owned by one grantor or one other person or for the first taxable year 
that the trust does not report pursuant to Sec.  1.671-4(b)(2)(i)(A) of 
this chapter.
* * * * *

PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT

0
Par. 12. The authority citation for part 602 continues to read as 
follows:

    Authority: 26 U.S.C. 7805.


0
Par. 13. In Sec.  602.101, paragraph (b) is amended by adding an entry 
in numerical order to the table to read as follows:


Sec.  602.101  OMB Control numbers.

* * * * *
    (b) * * *

------------------------------------------------------------------------
                                                            Current OMB
   CFR part or section where identified and described       control No.
------------------------------------------------------------------------
 
                                * * * * *
1.671-5.................................................       1545-1540
 
                                * * * * *
------------------------------------------------------------------------


    Approved: January 5, 2006.
Mark E. Matthews,
Deputy Commissioner for Services and Enforcement.
Eric Solomon,
Acting Deputy Assistant Secretary.
[FR Doc. 06-396 Filed 1-23-06; 8:45 am]
BILLING CODE 4830-01-U