The IRS has extended the relief through September 2021 for real estate mortgage investment conduits and investment trusts that provide forbearances or modify lease agreements on federally-backed mortgage loans during the coronavirus pandemic, according to Rev. Proc. 2021-12. Specifically, the IRS extended one safe harbor for real estate mortgage investment conduits that allows them to make forbearance-related changes to mortgages without being treated as having engaged in a prohibited transaction or as replacing one mortgage with another.
Net income resulting from prohibited transactions under Internal Revenue Code Section 860F(a)(1) is ordinarily subject to a 100% tax, according to the IRS. The agency also extended a safe harbor that allows investment trusts to make changes to mortgages or leases without those trusts being treated as having demonstrated a power to vary, which is any authority to change investments for certificate holders, according to Thursday's procedures.
The two safe harbors, originally announced in Rev. Proc. 2020-26 and Rev. Proc. 2020-34, were set to expire at the end of 2020, according to the IRS. The Coronavirus Aid, Relief, and Economic Security Act allows homeowners to request forbearances if they're suffering financially because of the pandemic.
--Editing by Leah Bennett.
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