SECTION 6. ASSET TEST

.01 The following three requirements must be satisfied–

(1) At the time of the transfer, and at

the close of each of the transferee’s two fiscal years preceding the year of transfer, the transferee’s gross assets for financial reporting purposes exceed $100 million and its net assets for financial reporting purposes exceed $10 million;

(2) The transferee is an eligible corporation (as defined in § 860L(a)(2)) that makes a written agreement that any subsequent transfer of the interest will be to another eligible corporation in a transaction that satisfies section 4; and

(3) The facts and circumstances known to the transferor on or before the date of the transfer must not reasonably indicate that the taxes associated with the residual interest will not be paid. The consideration given to the transferee to acquire the noneconomic residual interest in the REMIC is only one factor to be considered. However, if the amount of consideration is so low that under any set of reasonable assumptions a reasonable person would conclude that the taxes associated with holding the residual interest will not be paid, then the transferor is deemed to know that the transferee cannot or will not pay. In determining whether the amount is too low, the specific terms of the formula test in section 5 of this revenue procedure need not be used.

.02 For purposes of section 6.01 of this revenue procedure, all of the following rules apply:

(1) The gross assets and net assets of a transferee do not include any obligation of any person related to the transferee (as defined in § 860L(g)) or any other asset if a principal purpose for holding or acquiring that asset is to permit the transferee to satisfy section 6 of this revenue procedure;

(2) A transfer fails to meet the requirements of section 6 of this revenue procedure if the transferor knows, or has reason to know, that the transferee will not honor the restrictions on subsequent transfers of the residual interest; and

(3) Section 6.01(2) fails to be satisfied in the case of any transfer or assignment of the interest to a foreign branch of an eligible corporation or any other arrangement by which the interest is at any time subject to net tax by a foreign country or possession of the United States.