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more other pass-through entities) an ownership interest
in a FASIT and a record holder of an interest in the pass-
through entity is neither a corporation to which the provi-
sions of section 11 apply, a FASIT, nor another pass-
through entity, there is hereby imposed on the pass-
through entity a tax, for the taxable year, equal to the
product of—
‘‘(1) the amount of taxable income for such tax-
able year attributable to the FASIT ownership inter-
est held (directly or through one or more other pass-
through entities) and allocable to the pass-through
interest held by such record holder, multiplied by
‘‘(2) the highest rate of tax specified in section
11(b)(1).
‘‘(f) PASS-THROUGH ENTITY.—For purposes of this
section, the term ‘pass-through entity’ has the same mean-
ing as that provided in section 860E(e)(6), except that
such term shall also include S corporations.
‘‘(g) EXCEPTIONS.—No tax shall be imposed by sub-
section (e) to the extent a pass-through entity—
‘‘(1) holds an ownership interest in a FASIT
representing a retained economic interest in debt ob-
ligations originated by the pass-through entity in
connection with the pass-through entity’s sale of
goods or services, or
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‘‘(2) holds an ownership interest in a FASIT
for sale to customers in the ordinary course of busi-
ness, or is a dealer in securities and holds an owner-
ship interest in a FASIT for no more than one
month.
‘‘(h) EXCEPTION WHERE HOLDER FURNISHES AFFI-
DAVIT.—No tax shall be imposed by subsection (e) with
respect to any interest in a pass-through entity for any
period if—
‘‘(1) the record holder of such interest furnishes
to such pass-through entity an affidavit that such
record holder is a FASIT, a corporation to which
the provisions of section 11 apply, or another pass-
through entity, and
‘‘(2) during such period, the pass-through en-
tity receiving the affidavit does not have actual
knowledge that such affidavit is false.
‘‘(i) WAIVER.—The Secretary may waive the tax im-
posed by subsection (a) on any transfer if—
‘‘(1) within a reasonable time after discovery
that the transfer was subject to tax under subsection
(a) steps are taken so that the interest is no longer
held by the prohibited holder, and
‘‘(2) there is paid to the Secretary such
amounts as the Secretary may require.
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‘‘(j) ADMINISTRATIVE PROVISIONS.—For purposes of
subtitle F, the taxes imposed by this section shall be treat-
ed as excise taxes with respect to which the deficiency pro-
cedures of such subtitle apply.
‘‘SEC. 855G. ADDITIONAL TAXES.
‘‘(a) PROHIBITED TRANSACTION TAX.—
‘‘(1) IMPOSITION OF TAX.—A tax is hereby im-
posed for each taxable year of a FASIT equal to 100
percent of the net income derived from prohibited
transactions (disregarding any losses from prohib-
ited transactions).
‘‘(2) PROHIBITED
TRANSACTION.—For pur-
poses of this subsection, the term ‘prohibited trans-
action’ means—
‘‘(A) any acquisition or disposition of as-
sets other than in accordance with the terms
and conditions set forth in the agreements, in-
dentures, or other instruments pursuant to
which its qualified debt instruments and owner-
ship interests are issued,
‘‘(B) any acquisition or disposition of as-
sets for the primary purpose of recognizing
gains or decreasing losses resulting from mar-
ket value changes,
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‘‘(C) any acquisition of a debt instrument
for the primary purpose of realizing income
from the operation, management, rental, leas-
ing, or sale of property acquired or to be ac-
quired in connection with the default or immi-
nent default thereof, and
‘‘(D) the receipt of any income attributable
to an asset which is not described in section
855A(a)(3).
‘‘(b) TAX ON INCOME FROM FORECLOSURE PROP-
ERTY.—
‘‘(1) IN GENERAL.—A tax is hereby imposed for
each taxable year on the net income from foreclosure
property of each FASIT. Such tax shall be computed
by multiplying the net income from foreclosure prop-
erty by the highest rate of tax specified in section
11(b).
‘‘(2) NET INCOME FROM FORECLOSURE PROP-
ERTY.—For purposes of this part, the term ‘net in-
come from foreclosure property’ means the amount
which would be the FASIT’s net income from fore-
closure property under section 857(b)(4)(B) if the
FASIT were a real estate investment trust and all
property acquired by the FASIT in connection with
the default or imminent default of a debt obligation
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were treated as if it were real property and as if it
were foreclosure property.’’
SEC. 3. CONFORMING AMENDMENTS.
(a) The last sentence of paragraph (1) of section
582(c) of the Internal Revenue Code of 1986 is amended
to read as follows: ‘‘For purposes of the preceding sen-
tence, any regular or residual interest in a REMIC and
any ownership interest or qualified debt instrument issued
by a FASIT shall be treated as an evidence of indebted-
ness.’’
(b) 
Sections 
593(d)(4), 
856(c)(6)(E), 
and
7701(a)(19)(C) of the Internal Revenue Code of 1986, are
each amended by adding at the ends thereof the following
sentence: ‘‘The provisions of this section applicable to reg-
ular and residual interests in a REMIC shall also apply
to interests and instruments in a FASIT.’’
SEC. 4. EFFECTIVE DATE.
The amendments made by sections 2 and 3 shall be
effective upon the date of enactment.
Æ
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