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1985 appreciation or decline in the value of Freddie
Mac assets will not be taken into account for tax
purposes. Under these rules, for purposes of
determining gain, the basis of any asset held on
January 1, 1985, is to be the higher of (1) the regular
adjusted basis of the asset in the hands of Freddie
Mac, or (2) the fair market value of the asset on
January 1, 1985. For purposes of determining loss, the
basis of any asset held on January 1, 1985, is to be
the lower of these two figures. Where the amount
realized on the disposition of an asset is greater than
the lower of these figures, but less than the higher
figure, no gain or loss is to be recognized by Freddie
Mac on the disposition. [H. Conf. Rept. 98-861, supra
at 1038, 1984-3 C.B. (Vol. 2) at 292.]
DEFRA section 177(d)(2) provides a specific adjusted basis
for purposes of determining any gain on the sale or other
disposition of petitioner’s property: DEFRA section
177(d)(2)(A)(ii) provides that the adjusted basis of any asset
held by petitioner on January 1, 1985, shall, for purposes of
determining any gain, be equal to the higher of the regular
adjusted cost basis of such asset or the fair market value of
such asset as of such date. The Code has historically used the
adjusted basis for determining gain as the reference point for
determining the basis for the depreciation or amortization of
property. Indeed, section 167(g)3 specifies that the basis for
determining gain is the basis to be used for depreciation or
amortization.4
3Sec. 167(g) currently appears in the Code as sec. 167(c).
4Sec. 167(g) provides rules relating to the basis for the
depreciation of tangible property and the amortization of
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