- 5 - At various points in the taxable years 1985 and 1986, petitioner foreclosed on these mortgages and obtained freehold title to the underlying real estate. Petitioner was required to demonstrate its gain or loss on the foreclosures. For the taxable years 1985 through 1990, petitioner consistently accrued into income stated interest on all single- family mortgages that it owned, whether or not that interest was received. If such a mortgage was or became delinquent, petitioner nonetheless continued to accrue the interest through the date of foreclosure. Petitioner accrued into income interest from the date of acquisition through the date of foreclosure in respect of all mortgages acquired before January 1, 1985, that were subject to foreclosure after that date.4 As part of the legislation in which petitioner became subject to Federal income taxation, Congress enacted transition rules for determining petitioner’s adjusted basis in assets that it held on January 1, 1985. Those rules are contained in DEFRA section 177(d), 98 Stat. 711, which provides: (2) Adjusted basis of assets.-- (A) In general.--Except as otherwise provided in subparagraph (B), the adjusted basis of any asset of the Federal Home Loan Mortgage Corporation held on January 1, 1985, shall-- 4Petitioner’s treatment of interest accrued after Jan. 1, 1985, is not in dispute.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Next
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