Federal Home Loan Mortgage Corporation - Page 8

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          on January 1, 1985, as adjusted basis.  The parties agree that              
          there are no genuine issues of material fact relating to this               
          legal question.  Respondent assumes for purposes of this issue              
          that at least some of petitioner’s claimed intangibles are                  
          amortizable for tax purposes.                                               
          Arguments of the Parties                                                    
               Petitioner claims that the special basis rules of DEFRA                
          section 177(d)(2) provide the adjusted basis for purposes of                
          amortizing any intangibles that it held as of January 1, 1985.              
          Petitioner contends that this result is required by the                     
          interaction of section 167(g) and DEFRA section 177(d)(2)(A).               
          Thus, petitioner claims that it is entitled to amortize its                 
          alleged intangibles at their fair market value.                             
               Respondent argues that DEFRA section 177(d)(2) does not                
          provide rules for determining the adjusted basis for amortization           
          of petitioner’s intangibles but, instead, provides special basis            
          rules solely for purposes of determining gain and loss from the             
          sale or other disposition of property that petitioner held on               
          January 1, 1985.  He argues that petitioner’s adjusted basis for            
          purposes of amortizing any intangibles that it might have held on           
          that date is determined under the regular adjusted cost basis               
          rules of the Code without reference to the special basis rules of           
          DEFRA section 177(d)(2).  Respondent contends that petitioner               
          would have relatively little or no adjusted cost basis.                     






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