SECTION 7. EXAMPLES

.01 Example 1 . Transfer to partnership. X transfers a noneconomic residual interest in a REMIC to Partnership P . Y and Z are the partners of P . The transfer does not satisfy the formula test of section 5. Even if Y and Z are eligible corporations that satisfy section 6.01(1) and that make the written agreement in section 6.01(2), the transfer fails to qualify under section 4 because P is a partnership rather than an eligible corporation.

.02 Example 2 . Transfer to corporation without capacity to carry additional resid- ual interests . During the first ten months of a year, Bank transfers five residual interests to Corporation U under circumstances meeting the requirements of section 6. Bank is the major creditor of U and for that reason has access to U ’s financial records. During the last month of the year, Bank transfers three additional residual interests to U . At the time of transfer, U ’s financial records indicate it has retained the previously transferred residual interests. Bank has knowledge of U ’s financial circumstances, including the aggregate tax liabilities it has assumed with respect to REMIC residual interests, that would reasonably cause Bank to conclude that U will be unable to meet its tax liabilities when due. The transfers in the last month of the year fail to satisfy section 4 and 6.01(3) because Bank has reason to know that U will not be able to pay the tax due on those interests.