qualified reserve fund
(7) Qualified reserve asset (A) In general The term “qualified reserve asset” means any intangible property which is held for investment and as part of a qualified reserve fund. (B) Qualified reserve fund For purposes of subparagraph (A), the term “qualified reserve fund” means 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). The aggregate fair market value of the assets held in any such reserve shall not exceed 50 percent of the aggregate fair market value of all of the assets of the REMIC on the startup day, and the amount of any such reserve shall be promptly and appropriately reduced to the extent the amount held in such reserve is no longer reasonably required for purposes specified in clause (i) or (ii) of this subparagraph. (C) Special rule A reserve shall not be treated as a qualified reserve for any taxable year (and all subsequent taxable years) if more than 30 percent of the gross income from the assets in such fund for the taxable year is derived from the sale or other disposition of property held for less than 3 months. For purposes of the preceding sentence, gain on the disposition of a qualified reserve asset shall not be taken into account if the disposition giving rise to such gain is required to prevent default on a regular interest where the threatened default resulted from a default on 1 or more qualified mortgages.