Regular Interest [Income Tax] Law and Legal Definition

According to 26 USCS § 860G [Title 26. Internal Revenue Code; Subtitle A. Income Taxes; Chapter 1. Normal Taxes and Surtaxes; Subchapter M. Regulated Investment Companies and Real Estate Investment Trusts; Part IV. Real Estate Mortgage Investment Conduits], regular interest means “any interest in a REMIC which is issued on the startup day with fixed terms and which is designated as a regular interest if--

(A) such interest unconditionally entitles the holder to receive a specified principal amount (or other similar amount), and

(B) interest payments (or other similar amount), if any, with respect to such interest at or before maturity--

(i) are payable based on a fixed rate (or to the extent provided in regulations, at a variable rate), or

(ii) consist of a specified portion of the interest payments on qualified mortgages and such portion does not vary during the period such interest is outstanding.

The interest shall not fail to meet the requirements of subparagraph (A) merely because the timing (but not the amount) of the principal payments (or other similar amounts) may be contingent on the extent of prepayments on qualified mortgages and the amount of income from permitted investments. An interest shall not fail to qualify as a regular interest solely because the specified principal amount of the regular interest (or the amount of interest accrued on the regular interest) can be reduced as a result of the nonoccurrence of 1 or more contingent payments with respect to any reverse mortgage loan held by the REMIC if, on the startup day for the REMIC, the sponsor reasonably believes that all principal and interest due under the regular interest will be paid at or prior to the liquidation of the REMIC.”