[Code of Federal Regulations]
[Title 26, Volume 11]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.1054-1]

[Page 173-174]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.1054-1  Certain stock of Federal National Mortgage Association.

    (a) In general. The basis in the hands of the initial holder of a 
share of stock which is issued pursuant to section 303(c) of the Federal 
National Mortgage Association Charter Act (12 U.S.C., section 1718) in a 
taxable year beginning after December 31, 1959, shall be an amount equal 
to the issuance price of the stock reduced by the amount, if any, 
required by section 162(d) to be treated (with respect to such share) as 
an ordinary and necessary business expense. See section 162(d) and Sec. 
1.162-19. For purposes of this section the initial holder is the 
original purchaser who is issued stock of the Federal National Mortgage 
Association (FNMA) pursuant to section 303(c) of the Act and who appears 
on the books of FNMA as the initial holder. See Sec. 1.162-19.
    (b) Example. The provisions of this section may be illustrated by 
the following example:

    Example: Pursuant to section 303(c) of the Federal National Mortgage 
Association Charter Act a certificate of FNMA stock is issued to A as of 
January 1, 1961. The issuance price of the stock was $100 and the fair 
market value of the stock on the date of issue was $69. A was required 
by section 162(d) to treat $31 as a business expense for the year 1961. 
The basis of the share of stock in the hands of A, the initial holder, 
shall be

[[Page 174]]

$69, the amount paid for the stock ($100) reduced by $31.

[T.D. 6690, 28 FR 12254, Nov. 19, 1963]