Cashmere Valley Bank v Dept of Revenue | WA Supreme Court - Cashmere's investments were not backed by any encumbrance on property nor did Cashmere have any legal recourse to the underlying trust assets in the event of default...

IN THE SUPREME COURT OF THE STATE OF WASHINGTON

CASHMERE VALLEY BANK, Petitioner, v. STATE OF WASHINGTON, DEPARTMENT OF REVENUE, Respondent. EXCERPT:

"We hold that Cashmere cannot claim the deduction because its investments in REMICs and CMOs were not "primarily secured" by first mortgages or trust deeds. Cashmere's investments in REMICs and CMOs gave it the right to receive defined income streams from a pool of mortgages, trust deeds, and mortgage-backed securities, held in trust for investors. The ultimate source of cash flow was mortgage payments. However, Cashmere's investments were not backed by any encumbrance on property nor did Cashmere have any legal recourse to the underlying trust assets in the event of default. Thus, Cashmere's investments were not "primarily secured" by mortgages or trust deeds."

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