Phantom Income

Income represented by ownership of a security considered taxable to the holder, even though no cash is received. This may occur when the issuer keeps part of cash flow from the security to cover the labor and other out-of-pocket costs, or when investors purchase Residual cash flows from overcollateralization or excess cash flow from mortgage principal and interest payments.Real Estate Mortgage Investment Conduits (Remics) which issue securities from a trust, were designed to overcome this problem.