Federal Home Loan Mortgage Corporation - Page 1

                                 T.C. Memo. 2006-153                                  

                               UNITED STATES TAX COURT                                

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

               Docket Nos. 3941-99, 15626-99.     Filed July 25, 2006.                

                    At the close of business on Dec. 31, 1984, P had                  
               30 debt instruments outstanding on which it paid                       
               effective contract interest rates that were below                      
               current interest rates that P would have incurred had                  
               it issued comparable debt instruments.  P’s right to                   
               use the proceeds of these financing arrangements with                  
               below-market interest rates constitutes an economic                    
               benefit generally referred to as “favorable financing”.                
               In a prior Opinion, we held that special legislative                   
               provisions entitled P to use the fair market values of                 
               its intangible assets on Jan. 1, 1985, as its bases for                
               purposes of amortization.  Fed. Home Loan Mortgage                     
               Corp. v. Commissioner, 121 T.C. 125 (2003).  In another                
               prior Opinion, we held that the benefit of below-market                
               financing can, as a matter of law, constitute an                       
               intangible asset which P may amortize if it establishes                
               a fair market value and a limited useful life.  Fed.                   
               Home Loan Mortgage Corp. v. Commissioner, 121 T.C. 254                 

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