Federal Home Loan Mortgage Corporation - Page 17

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          III. Tax Returns                                                            
               Petitioner claimed a tax basis for its favorable financing             
          equal to its claimed fair market value at close of business on              
          December 31, 1984.  On its 1985 Federal income tax return,                  
          petitioner claimed that as of December 31, 1984, its favorable              
          financing intangible assets had an aggregate amortizable value of           
          $456,021,853.9  Petitioner now claims that its favorable                    
          financing intangible assets had an aggregate amortizable value of           
          $428,391,551 on January 1, 1985.10                                          
                                       OPINION                                        
               As part of the legislation that subjected petitioner to                
          Federal income taxation, Congress enacted a dual-basis rule for             


               9 On its original Federal income tax returns for the years             
          at issue, petitioner reported the aggregate adjusted bases of its           
          favorable financing intangible assets as follows:                           
                                        Aggregate adjusted                            
                                        basis of favorable                            
                    Year                financing intangible assets                   
                    1985                     $456,021,853                             
                    1986                     391,552,352                              
               1987                          337,931,651                              
                    1988                     283,234,501                              
                    1989                     237,398,945                              
                    1990                     196,718,525                              
          Petitioner adjusted the bases of the favorable financing                    
          intangible assets for tax benefits received and the lost bases on           
          retirements.                                                                
               10 Petitioner reduced the value of its favorable financing             
          intangible assets using the valuation performed by Dr. Stephen M.           
          Schaefer.                                                                   




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