### Question
How does Regulated Investment Companies and Real Estate Investment Trusts define qualified reserve fund?


### Answer
Under *26 U.S.C. § 860G*, **qualified reserve fund** is defined as:

> any reasonably required reserve to—



(i) provide for full payment of expenses of the REMIC or amounts due on regular interests in the event of defaults on qualified mortgages or lower than expected returns on cash flow investments, or



(ii) provide a source of funds for the purchase of obligations described in clause (ii) or (iii) of paragraph (3)(A)

#### Citation:
  - *26 U.S.C. § 860G*
  - Heading: **Subtitle A-Income Taxes > CHAPTER 1-NORMAL TAXES AND SURTAXES > Subchapter M-Regulated Investment Companies and Real Estate Investment Trusts > PART IV-REAL ESTATE MORTGAGE INVESTMENT CONDUITS**

