§5261 Gain or Loss From Sale or Exchange of Certain Preferred Stock

Summary

Treats profit or loss from selling certain preferred shares in Fannie Mae or Freddie Mac as ordinary income or ordinary loss for tax purposes. It only covers preferred shares that were owned on September 6, 2008, or that were sold between January 1, 2008 and September 6, 2008. Defined terms: applicable preferred stock — preferred shares in Fannie Mae or Freddie Mac that meet the dates above. applicable financial institution — certain financial firms under the tax code or depository institution holding companies. If a sale happened in the January–September 2008 window, the seller must have been a covered financial institution at the time of sale. If the stock was owned on September 6, 2008 and sold later, the seller must have been a covered institution for the whole period from September 6 until the sale. The Treasury Secretary can extend these rules in special cases (including partners or transfers of basis) and can write rules to carry them out. The rule applies to sales after December 31, 2007 in tax years ending after that date.