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IRS WITHDRAWS PROPOSAL TO TREAT MORTGAGE LOSSES AS CAPITAL LOSSES

April 23, 2008

In a victory for non-bank investors in mortgages, the IRS yesterday backed off plans to treat mortgages as capital assets. This is good news for Fannie Mae and other large institutional investors in mortgages. Corporations can only deduct capital losses to the extent of capital gains; the now-withdrawn IRS proposal would have left many institutions with large non-deductible capital loss carryforwards.

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