Federal Home Loan Mortgage Corporation - Page 1

                                 T.C. Memo. 2003-298                                  

                               UNITED STATES TAX COURT                                

                FEDERAL HOME LOAN MORTGAGE CORPORATION, Petitioner v.                 
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      

               Docket Nos. 3941-99, 15626-99.     Filed October 27, 2003.             

                    P was originally exempt from Federal income                       
               taxation.  However, on Jan. 1, 1985, P became subject                  
               to taxation under the Deficit Reduction Act of 1984                    
               (DEFRA), Pub. L. 98-369, sec. 177, 98 Stat. 709.                       
               During 1983 and 1984, when it was still exempt from                    
               income tax, P incurred certain costs relating to its                   
               “Freddie Mac” trade name and its trademark “Gnomes”.                   
               In its return for 1985, P filed a statement signifying                 
               its election to amortize its 1983 and 1984 trademark                   
               and trade name expenditures under sec. 177, I.R.C.                     
                    Held:  Sec. 177(a), I.R.C., provides an election                  
               to amortize trademark and trade name expenditures over                 
               a period of not less than 60 months for expenditures                   
               “paid or incurred during a taxable year beginning after                
               December 31, 1955”.  P’s trademark and trade name                      
               expenditures were not paid or incurred during P’s                      
               taxable years because P was exempt from income tax                     
               during those years.  P is not entitled to deductions                   
               under sec. 177, I.R.C.                                                 

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