Federal Home Loan Mortgage Corporation - Page 38

                                       - 38 -                                         
               If petitioner entered the market and purchased its debt                
          obligations for less than the amount that it had borrowed,                  
          petitioner would normally realize income equal to the difference            
          between the amount it borrowed and the amount it paid to purchase           
          its debt instruments.  We think that respondent’s argument that             
          petitioner could have received discharge of indebtedness income             
          by repurchasing its debt at a discount supports our conclusion              
          that petitioner’s favorable financing had value.                            
              C.   Respondent’s Argument That the Value of Petitioner’s              
                    Favorable Financing Is Limited to the Value of                    
                    Petitioner’s Income Spread                                        
               Assuming, without conceding, that favorable financing is a             
          valuable asset, respondent argues that the price an acquirer                
          would pay to purchase petitioner’s rights and obligations with              
          respect to its CMOs or GMCs would not exceed the present value of           
          petitioner’s spread income associated with those instruments.  As           
          of January 1, 1985, respondent asserts that the present value of            
          the spread related to petitioner’s GMCs and CMOs equaled                    
          approximately $11.4 million and $7.2 million, respectively.                 
               Dr. Hakala concluded that favorable financing is not an                
          intangible asset; however, Dr. Hakala found that petitioner’s               
          income spread has value because its assets and liabilities are              
          closely matched.15  According to Dr. Hakala, when previously                


               15 Dr. Hakala indicates that the CMOs and GMCs are exactly             
          matched.                                                                    




Page:  Previous  28  29  30  31  32  33  34  35  36  37  38  39  40  41  42  43  44  45  46  47  Next

Last modified: May 25, 2011