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Ordinary loss for Fannie and Freddie preferreds?

September 24, 2008

Tax Analysts reports ($link) that taxwriters may let financial institutions who own now-worthless Fannie Mae and Freddie Mac preferred stock to take it as an ordinary deduction. No legislation to do so has been introduced, but such treatment would ease the pain of the wipeout for the holders.

Normally such losses are capital losses, which are only deductible to the extent of capital gains for corporate taxpayers, and which expire if not used within five years.

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