Federal Home Loan Mortgage Corporation - Page 14

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          Income Tax Regs.; and any general theory of consistent                      
          accountancy does not assist petitioner.                                     
               Petitioner’s position disregards the fact that it was tax              
          exempt for periods before January 1, 1985, and any interest which           
          might have been accrued on its books and records did not accrue             
          as taxable income.  Petitioner was not required to file an income           
          tax return for years before 1985.  See secs. 6011(a), 6012(a),              
          6072(b).  Thus, petitioner’s interest accruals for the periods              
          before January 1, 1985, could not have been “returned as income”.           
          Petitioner cites no authority which supports its contention that            
          previously tax-exempt taxpayers which become taxable must, as a             
          general rule, adjust their regular adjusted cost basis upward to            
          account for items of interest that would have been accrued as               
          taxable income if those taxpayers had previously been taxable.              
          Nothing in section 166, the regulations interpreting that                   
          section, or, more specifically, the transition rules of DEFRA               
          section 177(d) supports petitioner’s position.                              
               Petitioner relies upon Rev. Rul. 55-437, 1955-2 C.B. 548,              
          and argues that under this ruling, adjustments to basis must be             
          made as if the taxpayer, in fact, had been subject to tax and               
          that these adjustments must be made according to the accounting             
          method that the taxpayer adopts in its first taxable year.  We do           
          not read Rev. Rul. 55-437, supra, this broadly.                             








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