To: jeeyacationegmaitcom[[email protected]] From: Lesley Groff Sent: Fri 4/24/2009 1:20:30 AM Subject: Fw: Elias Origin From: david To: Lesley Groff Sent: Thu Apr 23 17:54:18 2009 Subject: Fw: Elias Thanks for arranging my meeting yesterday Please make sure Jeffrey sees the email as this gets his questions (first draft), answered Much thanks, DM, „ Sent via BlackBerry from T-Mobile David Mitchell NOTE NEW ADDRESS 41 E. 60th Street - 6th Floor IIIIIIIIIIIII[0022 Office Fax Cell Original Message From: "Zuckerman, Elias M." Dat • • • To: Cc: Amengual, Randolp Subject: FW: Elias David: Per our discussion this afternoon, I am sending you this email to summarize my responses to your questions below, based upon my research to date: 1. First, income earned by the Company from advance of funds to holders of insurance policies secured by pledges of such policies is interest income for tax purposes inasmuch as the income is compensation for the use of money. 2. For those members of the Company who materially participate in the Company, the interest income would appear to be characterized as interest income derived in the ordinary course of a trade of business rather than investment income. Such members should be able to use losses from other businesses in which they materially participate to offset such income. 3. In the case of members of the Company who do not materially participate in the Company (and thus are subject to the passive activity loss rules), the situation is more complicated than we discussed over the telephone. The Treasury regulations provide a special rule to recharacterize interest income derived from a trade or business as investment income in a case in which the business operates with very little leverage. (See Reg. Section 1.469-2T(f)(4)) The purpose of this special rule was apparently to stop equity syndication of mortgage pools, EFTA_R1_01516591 EFTA02441871