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Part 3. Submission Processing

Chapter 11. Returns and Documents Analysis

Section 213. Form 1066, U.S. Real Estate Mortgage Investment Conduit (REMIC) Income Tax Return (Cont. 1)

3.11.213  Form 1066, U.S. Real Estate Mortgage Investment Conduit (REMIC) Income Tax Return (Cont. 1)

3.11.213.12  (01-01-2010)
♦Statute Returns♦

  1. Any return with a Received Date that is 2 years and 9 months or more after the Return Due Date is a potential statute control return.

  2. Statute returns must be routed to the Statute Control Unit daily or more often if needed.
    Exception: Do not route to Statute Control Unit for clearance, edit CCC "W" , and continue processing if any of the following conditions are present:

    • Compliance IRC Section 6020(b) returns.

    • Returns with "TC 59X" or "ICS" notated on the face of the return.

    • Returns that are substitute returns prepared by Examination (SFR) in top margin of the return.

    • Returns with a stamp indicating a previous clearance by Statute Control within the last ninety (90) days.

    • Tax returns that are secured by Examination ("Process as Original" is notated on Page 1).

  3. Statute returns are unprocessable until they are cleared by Statute Control.

    If... Then...
    The return is numbered, 1. Edit Action Code 310 to the bottom left margin of Form 1066.
    2. Leave the return in the batch and continue processing.
    The return is unnumbered, 1. Do not continue processing.
    2. Pull the return from the batch.
    3. Attach Form 4227 and check the box for Statute Control Unit.

  4. Edit CCC "W" to the dotted portion of Section 1, Line 1, if the return has been cleared by the Statute Control Unit. Statutes will stamp or indicate clearance on the front of the return.

3.11.213.13  (01-01-2010)
♦Re-Entry Document Procedures♦

  1. A return posted to the wrong account or module or attempting to post must be reprocessed to post to the proper account or module.

  2. Each re-entry return must have a Form 3893, Re-Entry Document Control, or Form 13596, Reprocessing Returns, attached.

    • Form 3893 is used to re-input documents that have not posted to an account or module.

    • Form 13596 is used to reprocess documents to the correct account or module that had previously posted to the wrong account or module.

  3. Always leave the Form 3893 or Form 13596 on the front of the return. It must remain as a permanent part of the document.

  4. Examine Form 3893 or Form 13596 to determine the action needed to make the return processable.

    Caution:

    If the Receive Date 2 years and 9 months or more after the Return Due Date, refer to Statute procedures before re-entering or reprocessing the return. See IRM 3.11.213.12, Statute Returns.

3.11.213.13.1  (01-01-2010)
♦Form 3893 -- Re-Entry Document Control♦

  1. Form 3893, Re-Entry Document Control, is used to re-input a return that has not posted to an account or module.

  2. If more than one return is in the batch and only the top Form 3893 has an entry in Box 1 (Alpha/Numeric block control no.), edit all returns using current processing instructions and keep all returns clipped together.

  3. Circle the CCC "G" if present.

  4. Do not edit CCC "G" on amended returns.

  5. Do not send Letter 1382C if a request for reasonable cause is attached.

  6. If the return was not edited according to current processing instructions, circle any Action Codes, Computer Condition Codes and any other edit marks that are no longer applicable. Re-edit according to current processing instructions.

  7. If the return was edited according to current processing instructions, ensure that the information from Form 3893 is edited on the return.

    Form 3893 Action Taken
    Box 14 Remarks Ensure that the information is edited to the return.
    Box 15 (Process as) 1. Circle any green rocker and edit marks that may indicate a receipt of remittance.
    2. Do not change any tax due amounts.

  8. Examine returns that have any color other than red editing in the tax data section to determine if the corrections are the result of improper perfection or taxpayer error.

    If... Then...
    Improper perfection, Edit the same correction in red/green (per local procedure) to the appropriate area.
    Taxpayer error, Leave the entries as shown on the document.

  9. A Received Date must be present on all re-input returns:

    If... Then...
    Received Date is not present, Edit a Received Date to the middle of the return.
    Multiple Received Dates are present, Circle all but the earliest date.

  10. When additional information is still needed to make the return processable, prepare approved Correspondence Action Sheet or Form 4227 for the appropriate action (e.g., correspondence, research, etc.).

  11. When perfection is not possible, edit Action Code 640 on the return and attach Form 4227 noting, "PERFECTION NOT POSSIBLE" and leave in batch.

3.11.213.13.2  (01-01-2010)
♦Form 13596 -- Reprocessing Returns♦

  1. Form 13596, Reprocessing Returns, is used to reprocess a return to the correct account or module that had previously posted to the wrong account or module.

  2. Circle CCC "G" if present.

  3. Do not edit CCC "G" on amended returns.

  4. Do not send Letter 1382C if a request for reasonable cause is attached.

  5. If the return was not edited according to current processing instructions, circle any Action Codes, Computer Condition Codes and any other edit marks that are not longer applicable. Re-edit according to current processing instructions.

  6. If the return was edited according to current processing instructions, ensure that the information from Form 13596 is edited on the return.

    Form 13596 Action Taken
    TIN correction Edit correct TIN on return.
    Tax Period correction Edit correct Tax Period ending on return.
    Reasonable cause Edit appropriate computer condition code.
    a. Edit CCC "R" if the "FTF" box is checked.
    b. Edit CCC "D" if the "FTP" box is checked.

  7. Examine returns that have any color other than red editing in the tax data section to determine if the corrections are the result of improper perfection or taxpayer error.

    If... Then...
    Improper perfection, Edit the same correction in red/green (per local procedure) to the appropriate area.
    Taxpayer error, Leave the entries as shown on the document.

  8. A Received Date must be present on all reprocessed returns.

    If... Then...
    Received Date is not present, Edit a Received Date to the middle of the return.
    Multiple Received Dates are present, Circle all but the earliest date.

  9. Circle any green rocker and edit marks that may indicate a receipt of remittance.

  10. When additional information is still needed to make the return processable, prepare approved Correspondence Action Sheet or Form 4227 for the appropriate action (e.g., correspondence, research, etc.).

3.11.213.14  (01-01-2010)
♦Frivolous Arguments♦

  1. A frivolous argument is used for the purpose of expressing dissatisfaction with the substance, form, or administration of the tax laws by attempting to illegally avoid or reduce tax liabilities. Recognized frivolous arguments made by businesses include, but are not limited to, the examples in IRM 4.10.12, Frivolous Return Program, shown in Exhibit 3.11.213-2.

  2. Review the return to determine whether it appears to be a frivolous return.

    If... Then...
    The return meets any of the conditions identified as a frivolous return, See Exhibit 3.11.213-2.

    Caution:

    If the return shows the Action Code 440 "OSPC" (Ogden Submission Processing Campus) or 331 "CSPC" (Cincinnati Submission Processing Campus), and has a Form 4227 attached with the remarks, "Refer to Exam FRP for audit after processing" , continue to next procedure.

    		Remove the return from the batch and place the return in the locally designated basket for Examination, Frivolous Return Processing (FRP) for review.

    Note:

    IRM 4.10.12.1.3.3, Campus FRP Coordinators, requires Examination to expedite the return and make a determination whether it qualifies as a frivolous return within two (2) business days. If a determination is not made within the allowed timeframe, the Examination examiner will edit Action Code 440 "OSPC" or Action Code 331 "CSPC " in the lower left margin of Form 1066.

    Examination has selected the return as frivolous, e.g., indicated by an Action Code 440 (OSPC) or 331 (CSPC), and a Form 4227 with the remarks "Refer to Exam FRP for audit after processing" , but sends the return for processing, Continue processing the return using procedures in IRM 3.11.213. However, do not circle or void the Action Code indicating a frivolous return.

    Note:

    Returns having only zeroes, no entries, are blank or indicate "None" , "Not Liable" , etc., with no evidence of a frivolous argument are not to be considered as frivolous returns.

3.11.213.15  (01-01-2010)
♦Computer Condition Codes♦

  1. Computer Condition Codes (CCC) are used to identify a special condition or computation for the computer. Computer Condition Codes post to the Master File.

  2. Computer Condition Codes are edited to the dotted portion of Section 1, Line 1.

3.11.213.15.1  (01-01-2009)
CCC"B" - Electing out of Installment Sales Method

  1. Edit CCC "B" when the taxpayer has made an entry in the margin of either Schedule D or Form 4797 electing not to report property sales on the installment basis. Taxpayer's entry will be similar to "I elect out of the installment method" .

3.11.213.15.2  (01-01-2010)
♦CCC"D" - Reasonable Cause for Failing to Pay Timely♦

  1. Do not edit CCC "D" if the taxpayer requests abatement for "Failing to Pay Timely" when the return is submitted. Send Letter 1382C to inform the taxpayer of the proper procedure to follow to request penalty abatement, if, and when a penalty is assessed.

3.11.213.15.3  (01-01-2010)
♦CCC "F" - Final Return♦

  1. Edit CCC "F" when the "Final Return" box is checked or there is another indication the taxpayer is not liable for filing future returns. Notations may include (but are not limited to):

    • Final

    • Deceased

    • Out-of-Business

    • Liquidation

    • Exempt under IRC Section 501(c)(3)

    • Dissolved

3.11.213.15.4  (01-01-2009)
♦CCC "G" - Amended Returns♦

  1. See IRM 3.11.213.10.

3.11.213.15.5  (01-01-2009)
CCC "L" - Treaty Based Positions

  1. Edit this CCC "L" when the taxpayer has written "Section 6114" on the top of the return, and

  2. Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b), is attached to the return.

3.11.213.15.6  (01-01-2009)
CCC "O" - Module Freeze

  1. CCC "O" is entered when a Pre-settlement Manual Refund will be made and a Form 3753 (Manual Refund Posting Voucher), Form 5792 (Request for IDRS Generated Refund (IGR)), or Form 12857 (Refund Transfer Posting Voucher) is attached. Verify that the Name Control, EIN, and Tax Period on the return is the same as the data on the form.

  2. When issuing CCC "O" , research to determine if TC 840 (Manual Refund Transaction) has posted.

    If... Then...
    TC 840 has posted, Enter CCC "O" and continue processing.
    TC 840 has not posted, Enter Action Code 341 to issue Manual Refund.

3.11.213.15.7  (01-01-2010)
♦CCC "Q" - Return Filed Claiming TETR Only (Federal Telephone Excise Tax Credit Refund)♦

  1. CCC "Q" is edited on the REMIC return when Form 8913 (Credit for Federal Telephone Excise Tax Paid) is attached and the only entry on the 2006 tax return is edited on Line 2b.

    Caution:

    Do not enter this code if there are any other monetary amounts on the return.

3.11.213.15.8  (01-01-2010)
♦CCC"R" - Reasonable Cause for Failing to Timely File♦

  1. CCC "R" is no longer edited when a reason is given by the taxpayer for a delay in filing a return. Issue Letter 1382C and continue editing the return.

  2. Edit CCC "R" on the REMIC return when any of the following condition(s) are present:

    • There is an indication such as "DO NOT ASSESS FAILURE TO FILE PENALTY" on a secured return annotated with " 599" .

    Note:

    All "R" coded returns must have a received date. If one is not present, edit the date in the middle of the return.

3.11.213.15.9  (01-01-2010)
♦CCC "W" - "Cleared by Statute" Stamped on the Return♦

  1. CCC "W" is used when the return has been cleared by Statute Control (see IRM 3.11.213.12, Statute Returns).

3.11.213.15.10  (01-01-2009)
CCC "X" - Refund Settlement Freeze

  1. CCC "X" - A refund freeze code to be used as the need arises.

3.11.213.15.11  (01-01-2010)
♦CCC "3" - No Reply to Correspondence♦

  1. Edit CCC "3" when the return is completely unprocessable.

3.11.213.15.12  (01-01-2010)
♦CCC "4" - 6020(b) Return♦

  1. Edit CCC "4" when the IRS's Compliance Branch has prepared a return and the Revenue Officer has entered IRC 6020(b).

    Note:

    CCC "4" cannot be used with CCC "R" .

3.11.213.15.13  (01-01-2009)
CCC "7" - Reasonable Cause Denied

  1. CCC "7" is no longer edited by Code and Edit examiners. (See also IRM 3.11.213.15.2 and 3.11.213.15.7 regarding CCCs "D" and "R" , respectively.)

3.11.213.16  (01-01-2009)
Date REMIC Started

  1. No action required.

3.11.213.17  (01-01-2010)
Total Assets At The End of Tax Year - Box C

  1. The "Total Assets" is found in the upper right corner at the top of Page 1, Form 1066, Box C (Enter total assets at end of tax year).

  2. Edit Box C as follows:

    If... And... Then...
    Box C is blank, Schedule L, Line 4, Column (b) has an amount, Edit Column (b) amount to Box C (dollars only).
    Box C is blank, Schedule L, Line 4, Column (b) is blank, Edit Schedule L, Line 4, Column (a) amount to Box C (dollars only).
    Box C and Schedule L are blank,   No action necessary.

3.11.213.18  (01-01-2009)
Number of Residual Holders

  1. The following information pertains to the number of Residual Holders.

    If... Then...
    The number of residual holders is found on Page 4, the dotted portion of Question F, 1. Edit this number preceded by "3-" to the left margin of the "Deductions" section. See Figure 3.11.213-11.
    2. This entry must be all numeric, 1 through 999,999.
    Question F is blank, Count the number of Schedules Q attached and edit the total as the number of residual holders.
    If no Schedules Q are present, 1. Edit "1" preceded by "3-" to the left margin of the "Deductions" section if the "Trust" or "Corporation" boxes are checked on Question E.
    2. Edit "2" preceded by "3-" to the left margin of the "Deductions " section if the "Partnership" box is checked on Question 3.
    Question F is blank and no boxes on Question E are checked, Edit "2" preceded by " 3-" to the left margin of the "Deductions" section as the number of residual holders.
    The taxpayer has checked the "partnership" box under Question E, Page 4, 1. Count the Schedules Q attached and edit the total as the Number of Residual Holders.
    2. Edit "2" preceded by "3- " to the left margin of the "Deductions" section as the number of residual holders if there are NO Schedules Q attached.
    The taxpayer's figure exceeds 999,999, Enter "999999" (six 9s) preceded by "3-" to the left margin of the "Deductions" sections.

    Figure 3.11.213-11

    Editing of the Number of Residual Holders
    Please click here for the text description of the image.

    Editing of the Number of Residual Holders

3.11.213.19  (01-01-2009)
TEFRA

  1. This code is based on the taxpayer's response to Question G, Page 4, Form 1066. If the taxpayer checks the box in Question "G" , edit "1" preceded by "4-" to the left margin of the "Deductions " section. See Figure 3.11.213-12.

    Figure 3.11.213-12

    Editing of the TEFRA Code
    Please click here for the text description of the image.

    Editing of the TEFRA Code

3.11.213.20  (01-01-2009)
Missing Schedule Codes

  1. The valid Missing Schedule Codes are 32 and 35.

  2. It is possible for both Missing Schedules Codes to be present at the same time.

    If... Then...
    Form 1066, Page 1, Section I, Line 3 "Capital gain or (loss)" contains an entry, but Page 2, Schedule D, Capital Gains and Losses, is not attached or is blank, Edit code "32" preceded by "5-" to the left margin of the "Deductions" section.
    Form 1066, Page 1, Section I, Line 4, "Ordinary gain or (loss)" , contains an entry, but Form 4797, Sale of Business Property (Also Involuntary Conversion and Recapture Amounts), is not attached or is blank, Edit code "35" preceded by "5-" to the left margin of the "Deductions" section.
    Form 1066 entries are present as described above, and Schedule D and Form 4797 are missing or blank, Edit codes "32" and "35" preceded by "5-" to the left margin of the "Deductions" section.

3.11.213.21  (01-01-2009)
Correspondence Received Date

  1. No action required.

3.11.213.22  (01-01-2009)
CAF Indicator

  1. Editing of the CAF Codes is no longer required.

  2. The Centralized Authorization File (CAF) contains the type of authorization that taxpayers give to representatives regarding the taxpayers' accounts. Representatives may submit Form 2848, Power of Attorney (POA) and Declaration of Representative, or Form 8821, Tax Information Authorization (TIA).

    If. . . Then . . .
    Form 2848 or Form 8821 is attached, 1. Detach Form 2848 or Form 8821 from the return.
    2. Edit taxpayer name and EIN on Form 2848 or Form 8821 if missing.
    3. Edit Received Date on Form 2848 or Form 8821.
    4. Route Form 2848 or Form 8821 to CAF function.
    5. Edit action trail on tax return.
    A "General Power of Attorney" or a "Durable Power of Attorney" or "Tax Information Authorization" is submitted on any document other than Form 2848 or Form 8821, 1. Take no action.
    2. Leave the Power of Attorney or Tax Information Authorization attached to the return.
    3. Do not route to the CAF function.

3.11.213.23  (01-01-2009)
Audit Code

  1. The following information pertains to the Audit Code.

    If... Then...
    Form 8082, Notice of Inconsistent Treatment or Administrative Adjustment Request (AAR), is attached; Form 8275, Disclosure Statement, or Form 8275-R, Regulation Disclosure Statement, is attached, Edit Audit Code "1" preceded by "8-" to the left margin of the "Deductions" section.
    Form 926, Return by a U.S. Transferor of Property to a Foreign Corp., is attached, Edit Audit Code "2" preceded by "8-" to the left margin of the "Deductions" section.
    Form 5471, Information Return of U.S. Persons with Respect to Certain Foreign Corporations, is attached, Edit Audit Code "2" preceded by "8-" to the left margin of the "Deductions " section.
    Form 5713, International Boycott Report, is attached; or there is a "yes " answer to the Foreign Trust question "1" page 4, Additional Information, Edit Audit Code "2" preceded by "8-" to the left margin of the "Deductions " section.

    Note:

    Although Audit Codes 3, 4, 5 and 6 are also valid for this field, no uses for these codes were identified in Forms 1066 processing.

3.11.213.24  (01-01-2010)
♦Installment Sale Indicator♦

  1. Form 6252, Installment Sale Income, is used to report the sale of property on the installment plan.

  2. Codes are based solely on the taxpayer's response to Question 3 on Form 6252. See Figure 3.11.213-13.

  3. Edit the Installment Sale Indicator preceded by "9-" to the left margin of the "Deductions" section.

  4. Valid codes for the Installment Sale Indicator are as follows:

    Code One Form 6252 Multiple Forms 6252
    1 "Yes" response to Question 3. At least one form has a "Yes" response.
    2 "No" response to Question 3. All "NO" responses, or a combination of "NO" and/or blank responses. See Figure 3.11.213-13.
    3 "Yes" and "No" are checked or Question 3 is blank. Question 3 is blank on all forms.

    Figure 3.11.213-13

    Editing of the Installment Sale Indicator
    Please click here for the text description of the image.

    Editing of the Installment Sale Indicator

3.11.213.25  (01-01-2009)
Net Short Term Capital Gain or Loss

  1. The following information pertains to the editing of the Net Short Term Capital Gain or Loss.

    If... Then...
    Net Short Term Capital Gain is found on Page 2, Schedule D, Part I, Line 4, Edit the amount to the bottom right margin preceded by 11- on page 1, Form 1066, Dollars only, positive or negative. See Figure 3.11.213-14.
    Line 4 is blank, and there are entries leading to the total, Compute if necessary.

    Figure 3.11.213-14

    Editing of Net Short Term Capital Gain or Loss
    Please click here for the text description of the image.

    Editing of Net Short Term Capital Gain or Loss

3.11.213.26  (01-01-2009)
Net Long Term Capital Gain or Loss

  1. The following information pertains to the editing of the Net Long Term Capital Gain or Loss.

    If... Then...
    Net Long Term Capital Gain is found on Page 2, Schedule D, Part II Line 10, Edit the amount to the bottom right margin preceded by 12- on page 1, Form 1066. Dollars only, positive or negative.
    Line 10 is blank and there are entries leading to the total, Compute if necessary.

3.11.213.27  (01-01-2009)
Tax Data Perfection of Section I (Computation of Taxable Income or Net Loss)

  1. IMPORTANT: Do not edit Section I. Accept taxpayer's entries.
    Form 1066, Section I, Computation of Taxable Income or Net Loss, has not been transcribed since processing year 1990 (tax year 1989).

3.11.213.28  (01-01-2010)
Tax Data Perfection of Section II Line 1 - Total Tax (Schedule J, Part IV, Line 12)
Positive Only

  1. Perfect Form 1066, Section II, Line 1, Total Tax as follows:

    If... Then...
    Section II, Line 1 is blank, Check taxpayer's entry on Schedule J, Part IV, Line 12.
    Edit the amount from this line.
    Schedule J, Part IV, Line 12 is blank, but entries are shown on:

    • Schedule J, Part I (Tax on Net Income from Prohibited Transactions),

    • Schedule J, Part II (Tax on Net Income From Foreclosure Property), and/or

    • Schedule J, Part III (Tax on Contributions After the Startup Day).

    		 Math verify Parts I, II, III, and IV of Schedule J as described below in IRM 3.11.213.28.1 through IRM 3.11.213.28.3.

3.11.213.28.1  (01-01-2009)
Schedule J, Part I, Line 4 - Tax on Net Income from Prohibited Transactions

  1. The following information pertains to Schedule J, Part I, Line 4.

    If... Then...
    Math verifying Schedule J, 1. Line 2 (Total Income) must equal the sum of Lines 1a, 1b, 1c and 1d.
    2. Line 4 (Net Income From Prohibited Transactions) must equal Line 2 minus Line 3.

3.11.213.28.2  (01-01-2009)
Schedule J, Part II, Line 10 - Tax on Net Income From Foreclosure Property

  1. The following information pertains to Schedule J, Part II, Line 10.

    If... Then...
    Math verifying Schedule J, 1. Line 7 (Total Income From Foreclosure Property) must equal the sum of Line 5 and 6.
    2. Line 9 (Net Income From Foreclosure Property) must equal Line 7 minus Line 8.
    3. Line 10 must equal 35% of Line 9.

3.11.213.28.3  (01-01-2009)
Schedule J, Part III - Tax on Contributions After the Startup Day, and Part IV - Total Tax

  1. The following information pertains to Schedule J, Part III, Line 11 and Part IV, Line 12.

    If... Then...
    Math verifying Schedule J, 1. A schedule should be attached detailing the taxable contributions received during the calendar year after the startup date.
    2. Math verify Line 11 against the sum on the attachment listing the taxable contributions.
    3. Add Lines 4, 10, and 11 (Schedule J).
    4. Enter the sum on Schedule J, Part IV, Line 12, and on Page 1, Section II, Line 1 (Form 1066). Correct the return, if different.

3.11.213.28.4  (01-01-2009)
Section II, Line 2 - Tax Paid with Extension Positive Only

  1. The Tax paid with Form 7004 (Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns), must be a Positive Only amount.

    Note:

    Line 2 was identified as "Payments" and "Tax Paid with Extension" was separated into three-parts (e.g., Lines 2a, 2b, and 2c, identified as " Tax paid with Form 7004 " , " Credit for federal telephone excise tax paid (attach Form 8913) " , and " Add Lines 2a and 2b) " , respectively. The" Tax paid with Form 7004 " , was previously identified as Line 2a on the Tax Year 2006 revision of Form 1066.

  2. For returns claiming the Credit for Federal Telephone Excise Tax Paid (TETR) after 2007, edit the amount on the dotted line to the left of Line 2 for transcription entry. Also refer to instructions in 3.11.213.28.5, below, for handling of the Form 8913, as required.

3.11.213.28.5  (01-01-2010)
Section II, Line 2b - Credit for Federal Telephone Excise Tax Paid (TETR)Positive Only (Tax Year 2006 Revision)

  1. Line 2b - Credit for Federal Telephone Excise Tax Paid (TETR), must be a Positive Only amount.

  2. Place Form 8913 in the proper sequence order if Line 15, Column (d) or (e) contains a significant amount.

    If . . . Then . . .
    The credit on line 2b is the only entry on the return, Edit the following:
    (1) Entity area information (see IRM 3.11.213.5),
    (2) Tax Period (see IRM 3.11.213.6);
    (3) Computer Condition Code "Q" (see IRM 3.11.213.15.7);
    (4) Received Date (see IRM 3.11.213.7);
    (5) Signature (see IRM 3.11.213.8); and,
    (6) Form 8913 (place in sequence if Line 15, Column (d), or (e) contains ≡ ≡ ≡ ≡ ≡ ≡ ≡ .
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. Also refer to 3.11.213.28.4 for instructions regarding returns filed after 2007 claiming the Credit for Federal Telephone Excise Tax Paid (TETR).

3.11.213.28.6  (01-01-2009)
Section II, Line 3 - Tax Due (also referred to as "Balance Due" ) Positive Only

  1. This should be the excess of Line 1 over Line 2. If blank, subtract Line 2 (Tax Paid with Form 7004) from Line 1 (Total Tax).

  2. If the Tax Year 2006 revision of the form is used:

    1. This amount should be the excess of Line 1 over Line 2c. If blank, subtract Line 2c ("Add lines 2a and 2b" ) from Line 1 (Total Tax).

      Note:

      If Line 1 is blank, bring the amount forward from Schedule J, Line 12.

    2. Draw a line through "2c" on the form and edit a "2" to the left of the edit mark to facilitate transcription entry.

3.11.213.28.7  (01-01-2009)
Section II, Line 4 - Overpayment (also referred to as "Refund" ) Negative Only

  1. This amount should be the excess of Line 2 over Line 1. If blank, subtract Line 2 (Tax Paid with Form 7004) from Line 1 (Total Tax).

  2. Tax Year 2006 Revision Only: This amount should be the excess of Line 2c over Line 1. If blank, subtract Line 2c (Add lines 2a and 2b) from Line 1 (Total Tax).

Exhibit 3.11.213-1  (01-01-2009)
Real Estate Mortgage Investment Conduit - Form 1066

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Exhibit 3.11.213-2  (01-01-2009)
♦Potential Frivolous Arguments for Examination Review♦

Potential Frivolous Argument Description
Alleged Churches/First Amendment Income from non-religious sources and may claim a vow of poverty.
Altered Form Altering any or all line items with the intent of facilitating non-compliance with the tax laws.
Altered Jurat/UCC 1-207 Return contains income and deductions but the jurat has been altered or stricken. May include reference to UCC 1-207 or a statement that the return was not signed under penalties of perjury.
Amended Returns/Form 843 Claim Amended return or a Form 843 filed to obtain a total refund of all taxes paid in prior years, based on a tax avoidance argument.
Challenges to Authority/Due Process Questions various administrative authorities such as delegation orders, summons authority, privacy act, etc. Argues that they must be afforded a hearing or a trial before taxes can be assessed or before property can be seized.
Challenges to Authority/Title 26 or "law" in Other Documents Argues that Title 26 of the United States Code is not law because it was never enacted as named
Disclaimer Submits a disclaimer stating, " disclaims the liability for the tax due" , making the liability on the return zero.
Fifth Amendment Assertion of the Fifth Amendment right against self-incrimination as a basis for not providing any financial information.
Foreign Income Argues that United States citizens and residents are not subject to tax on their wages or other income derived from sources within the United States, as only foreign-based income or income received by nonresident aliens and foreign corporations from sources within the United States is taxable.
IRS is a Private Organization/Collects Tribute, Not Taxes Argues that the IRS is an entity named the Internal Revenue and Tax Service, Inc., which was incorporated in Delaware in 1933, it is a collection agency for the Federal Reserve Bank, or is part of the United Nations and is clandestinely leading the tax-paying public into a "new world order."
Not a Person Argues that a taxpayer is not a "person" within the meaning of section 7701(a)(14) of the Internal Revenue Code.
Obscene, Vulgar, Harassing Submits documents or other materials indicating that non-filing is due to dissatisfaction with tax policies or taxation in general. Often, this argument is expressed with obscene, vulgar, or crude language and characters in an extremely demeaning manner.
Protest Against Government Action/Inaction Argues that refusal to file or pay is justified because they disagree with government policies or spending plans.
Sixteenth Amendment Argues the Sixteenth Amendment was not properly ratified and therefore the federal government does not have the legal authority to collect an income tax without apportionment.
Straw Men Argues the government has created an entity separate and distinct from the taxpayer - a "straw man" and any tax obligations are exclusively those of the "straw man" .
Taxes are Voluntary/Law Does Not Require Submits a return, amended return or correspondence that argues income taxes are voluntary.
U.S. v. Long Submits a return with zero money amounts much the same as the Zero Return category and U.S. V. Long is referenced. See NOTE in Zero returns below.
Unsigned Returns The individual completes a return but fails to sign, a statement indicating disagreement with the tax system is attached or added to the return.
Valuation Income is not taxable because of the declining fair market value of the dollar, because the dollar is not backed by gold/silver, because the value of services is offset by the value of the labor (barter income), etc.
Zero Returns Submits a return with zero money amounts. A statement is attached claiming there is no section of the Internal Revenue Code that established an income tax liability. The statement may also contain arguments regarding the definition of income.
Note: Returns having only zeros, no entries, are blank, or indicate "None" ,"Not Liable" , etc. with no evidence of frivolous arguments are not to be considered as frivolous returns.
Other All others including those listed in Notice 2007-30. This category includes non-filer accounts resulting from initial compliance check such as cross-reference TINs.
Note:Frivolous arguments citing "Collection Due Process" (CDP) should be reviewed by Collections for possible referral to Appeals. Refer to IRM 5.19.8, Collection Appeal Rights Procedures, for additional information.

Exhibit 3.11.213-3  (01-01-2009)
♦U.S. Possessions State Abbreviations and ZIP Codes♦

City ZIP Code City ZIP Code
American Samoa (AS) Federated States of Micronesia (FM)
Faga'itua 96799 Chuuk 96942
Leone 96799 Kosrae 96944
Olosega Manua' 96799 Pohnpei 96941
Pago Pago 96799 Yap 96943
Marshall Islands (MH) Palau (PW)
Ebeye 96970 Koror 96940
Majuro 96960 Palau 96940
Northern Mariana Islands (MP) Virgin Islands (VI)
Capitol Hill 96950 Charlotte Amalie 00802
Rota 96951 Christiansted 00820
Saipan 96950 Cruz Bay 00830
Tinian 96952 Downtown 00840
Guam (GU) Frederiksted 00840
Agana 96910 Kingshill 00850
Inarajan 96917 Saint Croix 00820
Merizo 96916 Saint John 00830
Tamuning 96931 Saint Thomas 00805
Umatac 96915 Sunny Isle 00850
Yona 96915 Veterans Annex 00820
Puerto Rico (PR)
Adjuntas 00601 Laplata 00786
Aquada 00602 Lares 00669
Aquadilla 00603 Las Marias 00670
Agnes Buenas 00703 Las Piedras 00771
Aguirre 00704 Levittown 00949
Aibonito 00705 Loiza 00772
Anasco 00610 Loiza Street Station 00936
Angeles 00611 Loquillo 00773
Arecibo 00612 Manati 00674
Arroyo 00714 Maricao 00606
Bajadero 00616 Maunabo 00707
Barceloneta 00617 Mayaquez 00680
Barraquitas 00794 Mercedita 00715
Barrio Obrero Station 00935 Minillas Center 00936
Bayamon 00956 Moca 00676
Boqueron 00622 Morovis 00687
Cabo Rojo 00623 Naguabo 00718
Caguas 00725 Narajito 00719
Camuy 00627 Orocovis 00720
Canovanas 00729 Palmer 00721
Caparra Heights 00920 Patillas 00723
Carolina 00982 Penuelas 00624
Catano 00962 Ponce 00731
Cayey 00736 Puerta de Tierra 00936
Ceiba 00735 Puerta Real 00740
Cerro Gordon 00754 Punta Santiago 00741
Ciales 00638 Quebradillas 00678
Cidra 00739 Ramey 00603
Coamo 00769 Rincon 00677
Comerio 00782 Rio Blanco 00744
Condado 00907 Rio Grande 00721
Corozal 00783 Rio Piedras 00927
Coto Laurel 00780 Rosario 00636
Culebra 00775 Sabana Grande 00637
Dorado 00646 Sabana Hoyos 00688
Ensenada 00647 Sabana Seca 00952
Esperanza 00765 Saint Just 00978
Fajardo 00738 Salinas 00751
Fernandez Juncos 00936 San Antonio 00690
Florida 00650 San Francisco 00927
Fort Buchanan 00934 San German 00683
Garrachales 00652 San Juan 00936
Guanica 00653 San Lorenzo 00754
Guayama 00784 San Sebastian 00685
Guayanilla 00656 Santa Isabel 00757
Guaynabo 00965 Sanrurce 00936
Gurabo 00778 Toa Alta 00953
Hatillo 00659 Toa Boa 00949
Hato Rey 00936 Trujillo Alto 00976
Harmingueros 00660 University 00936
Humacao 00791 Utuado 00641
Isabela 00662 Vega Alta 00692
Jayuya 00664 Vega Baja (box 1-9049) 00694
Juana Diaz 00795 Vieques 00765
Juncos 00777 Villalba 00766
La Cumbre 00926 Yabucoa 00767
Lajas 00667 Yauco 00698

Exhibit 3.11.213-4  (01-01-2009)
♦Province, State and Territory Abbreviations♦

Australia State Abbreviation
Australian Capital Territory ACT
New South Wales NSW
Northern Territory NT
Queensland QLD
South Australia SA
Tasmania TAS
Victoria VIC
Western Australia WA
Brazil State Abbreviation
Acre AC
Alagoas AL
Amapa AP
Amazonas AM
Bahia BA
Ceara CE
Distrito Federal DF
Esperito Santo ES
Goias GO
Maranhao MA
Mato Grosso MT
Mato Grosso do Sul MS
Minas Gerais MG
Parana PR
Paraiba PB
Para PA
Pernambuco PE
Piaui PI
Rio Grande do Norte RN
Rio Grande do Sul RS
Rio de Janeiro RJ
Rondonia RO
Roraima RR
Santa Catarina SC
Sergipe SE
Sao Paulo SP
Tocantins TO
Canada Province/Territory Abbreviation
Alberta AB
British Columbia BC
Manitoba MB
New Brunswick NB
Newfoundland and Labrador NL
Northwest Territories NT
Nova Scotia NS
Nunavut NU
Ontario ON
Prince Edward Island PE
Quebec QC
Saskatchewan SK
Yukon YT
Cuba Provincias Abbreviation
Camaguey CG
Ciego de Avila CA
Cienfuegos CF
Ciudad di La Habana CH
Gramma (Bayamo) GR
Guantanamo GT
Holguin HO
La Habana HA
Matazas MT
Municipio Especial Isla de la Juventud IJ
Pinar del Rio PR
Sancti Spiritus SS
Santiago de Cuba SC
(Victoria de) Las Tunas LT
Villa Clara VC
Italy Provincia Abbreviation
Agrigento AG
Alessandria AL
Ancona AN
Aosta/Aoste AO
Arezzo AR
Ascoli Piceno AP
Asti AT
Bari BA
Belluna BL
Beneveto BN
Bergamo BG
Biella BI
Bologna BO
BolozanoBolzen BZ
Brescia BS
Brindisi BR
Cagliari CA
Caltanisetta CL
Campobasso CB
Caserta CE
Catania CT
Catanzaro CZ
Chieti CH
Como CO
Cosenza CS
Cremona CZ
Crotone KR
Cuneo CN
Enna EN
Ferrara FE
Firenze FI
Foggia FG
Forli FO
Frosinone FR
Genova GE
Gorizia GO
Grosseto GR
Imperia IM
Isernia IS
L'Aquila AQ
La Spezia SP
Latina LT
Lecce LE
Livorno LI
Lodi LO
Lucca LU
Macerata MC
Mantova MN
Massa-Carrara MS
Matera MT
Messina ME
Milano MI
Modena MO
Napoli NA
Novara NO
Nuoro NU
Oristano OR
Padova PD
Palermo PA
Parma PR
Pavia PV
Perugia PG
Pesaro-Urbino PS
Pescara PE
Piacenza PC
Pisa PI
Pistoia PT
Pordenone PN
Potenza PZ
Prato PO
Ragusa RG
Pavenna RA
Peggio de Calabria RC
Reggio nell'Emilia RE
Rieti RI
Rimini RN
Roma RM
Rovigo RO
Salerno SA
Sassari SS
Savona SV
Siena SI
Siracusa SR
Sondrio SO
Taranto TA
Teramo TE
Terni TR
Torino TO
Trapani TO
Trento TN
Treviso TV
Trieste TS
Udine UD
Varese VA
Venezia VE
Verbania VB
Vercelli VC
Verona VR
Vibo Valentia VV
Vincenza VI
Viterbo VT
Mexico State Abbreviation
Aguascalientes AGS
Baja California Norte BCN
Baja California Sur BCS
Campeche CAM
Chiapas CHIS
Chihuahua CHIH
Coahuila COAH
Colima COL
Distrito Federal DF
Durango DGO
Guanajuato GTO
Guerrero GRO
Hidalgo HGO
Jalisco JAL
Mexico MEX
Michoacan MICH
Morelos MOR
Nayarit NAY
Nuevo Leon NL
Oaxaca OAX
Puebla PUE
Queretaro QRO
Quintana ROO QROO
San Luis Potosi SLP
Sinaloa SIN
Sonora SON
Tabasco TAB
Tamaulipas TAMPS
Tlaxcala TLAX
Veracruz VER
Yucatan YUC
Zacatecas ZAC
The Netherlands Province Abbreviation
Drenthe DR
Flevoland FLD
Friesland FR
Gelderland GLD
Groningen GN
Lemburg LB
North Brabant NB
North Holland NH
Overijssel OV
South Holland ZH
Utrecht UT
Zeeland SLD

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