Apparently, I have confused you - The 90% test and the UTI account are two parts of the same whole. One is an income test, the other is simply where the undistributed earnings accumulate.
EXAMPLE - In a year with no SPO, they earn 1.50 taxable income and distribute 1.40. They pass the 90% test (1.40/1.50) and the "extra" .10 (1.50-1.40) increases the UTI account. There is no test specific to the UTI account. I was (not very clearly) referencing the 90% test when I said they were keeping themselves out of trouble on the UTI account.
They have until the following September to distribute 90% of the taxable earnings because that's the due date of the tax return. They can't be held responsible in December for distributing 90% of a number they won't know until as late as the following September. Hence, they are allowed to declare any monies paid before Sept 2012 to be distributions of 2011 income for the 90% test.
I will try to walk through my point about the impact of late Q SPO's using the relevant Q4 2010 numbers.
Management basically did this:
Taxable Earnings estimate = about 91M Cash dividend payable to pre-spo shares = about 78M
91M - 78M = 13M projected UTI increase for the period
They divided 13M by the dividend per share ($1.40)to get the number of SPO shares needed to distribute all of the Q4 taxable income (ie - keep UTI flat). The result was a 9.2M share SPO.
I believe you understood that part, but I just wanted to walk through it for everyone else.
And I think that may have been about my 2nd or 3rd options trade on AGNC, so, yes- it was a nice Christmas bonus for me ;)
I understand how the UTI is accumulated; I was more concerned with the timing of its distribution to avoid unnecessary taxes.
You did clear up the timing of the distributions for the 90% rule. I was under the impression that it needed to be a done deal by EOY (assuming a calendar tax year). From your comments, it would appear that AGNC has up until the September subsequent to the subject year to retroactively achieve the 90%, by payment of UTI.