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.”
[…]
