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petitioner. DEFRA sec. 177(d)(2), 98 Stat. 711. Specifically,
DEFRA section 177(d)(2)(A) 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--
(i) for purposes of determining any loss, be equal
to the lesser of the adjusted basis of such asset or
the fair market value of such asset as of such date,
and
(ii) for purposes of determining any gain, be
equal to the higher of the adjusted basis of such asset
or the fair market value of such asset as of such date.
The “special basis rules [were] designed to ensure that, to the
extent possible, pre-1985 appreciation or decline in the value of
* * * [petitioner’s] assets will not be taken into account for
tax purposes.” H. Conf. Rept. 98-861, at 1038 (1984), 1984-3
C.B. (Vol. 2) 1, 292.
Section 167(a) allows taxpayers to depreciate property used
in a trade or business, or held for the production of income, for
exhaustion, wear and tear, and obsolescence. Section 167(g)
provides that “The basis on which exhaustion, wear and tear, and
obsolescence are to be allowed in respect to any property shall
be the adjusted basis provided in section 1011 for the purpose of
determining the gain on the sale or other disposition of such
property.” The depreciation of intangible assets is specifically
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