Important Tax and Regulatory Information

Your resource to find regulatory and supplemental information from National Financial Services LLC (NFS).

Important Tax Information

Your 2016 Supplemental Mortgage Pool Statement

IRS regulations governing tax reporting for widely held fixed investment trusts (WHFITs) require National Financial Services LLC (NFS) to send supplemental information to certain customers who held Mortgage Pool Securities during 2016. We provide this information in a separate statement for each mortgage pool security that you owned in 2016.

Each supplemental mortgage pool statement has two primary sections. The smaller box on the page presents a summary for the year, listing total principal distributions, total gross interest, total interest expense, and total proceeds of sale. These yearly summary items are self-explanatory.

Just below this box is a larger box that provides additional details, transaction by transaction. The IRS regulations require us to report, as of the date the trust received or otherwise processed each transaction, each individual's pro rata share of each component of each transaction. The regulations require us to report, as appropriate, items of gross interest (as opposed to the net interest paid), principal factors, and the expense and market discount fraction to be used in calculating bond premium amortization and market discount accrual. Furthermore, we have grossed up all distributions to include any associated costs. Thus, total gross interest, for example, may be larger than the total interest amount that the trust distributed to you.

Below is a description of each category in the detail section, looking from left to right across the page.

Record/Trade Date If the transaction on the line is a distribution (of principal or interest), the date shown in this column is the record date. If the transaction is either a purchase or a sale, the date shown is the trade date.
Payment/Settlement Date If the transaction on the line is a distribution (of principal or interest), the date shown in this column is the payment date. If the transaction on the line is either a purchase or a sale, the date shown is the settlement date.
Quantity Quantity shows the original face value of the security.
Original Purchase Cost Reports the original cost of the security, excluding any payment for accrued interest. If you see an amount in this column, the transaction reported on this line is a purchase.
Principal Paid The amount of principal distributed to the shareholder for this single period. If you see an amount in this column, the transaction reported on this line is a principal distribution.
Proceeds of Sale Reports the proceeds of the sale of all or a portion of the security on the trade and settlement dates on the same line. We report proceeds net of any accrued interest received.
Gross Interest If the line is reporting a purchase, Gross Interest reports the interest paid as accrued interest.

If the line is reporting a sale, Gross Interest reports the interest received as accrued interest.

Otherwise, Gross Interest reports an interest distribution for the indicated period. All Gross Interest includes any associated interest expenses in the amount reported.

Interest Expense Reports the Interest Expense amount included in the corresponding Gross Interest amount, reported on the same line.
Principal Balance Reports the current principal balance per $1,000 of original face amount. We report the principal balance, adjusted for the principal payment made in the previous period.
Market Discount Fraction Generally used for calculating adjustments for transactions made on the secondary market, the fraction is calculated by dividing the current interest payment by the total projected remaining interest payment amount. One generally uses the market discount fraction to calculate market discount or premium.
Remaining Income Adjustment Reports the portion of the premium or discount that remains unamortized or unaccreted as of the beginning of the period noted on this line. The remaining income adjustment represents a rolling total, used for secondary market calculations. The principal balance minus the purchase cost equals the remaining income adjustment. A positive adjustment represents a market discount. A negative adjustment represents a premium. Generally, you can use negative income adjustments to offset part of the interest income.
Income Adjustment Reports the increase or decrease in taxable income, due to the premium or market discount applied to purchases of the CUSIP for this account.

For further details regarding the use of this information, we suggest that you contact your tax advisor or the IRS.

National Financial does not provide legal or tax advice. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact investment results. National Financial cannot guarantee that the information herein is accurate, complete, or timely. National Financial makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Consult an attorney or tax professional regarding your specific situation.