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Freddie, Fannie, taxes and you

September 9, 2008

Even if your mortgage isn’t directly connected to Fannie Mae and Freddie Mac — or you’re not a homeowner at all — you’ve probably been wondering and worrying about just what the latest rescue bail-out federal intervention will mean to you.

CNNMoney.com talked with some financial experts who give federal officials good marks for
"devising a plan that gives first priority to taxpayers and minimizes
their potential cost."

Fannie_mae_logo_2
Thomas Stanton, attorney, author of two books on Fannie and Freddie and
a lecturer at Johns Hopkins University, told CNNMoney.com that when it comes to who gets paid
first and who gets hit last, taxpayers are above
preferred shareholders. "The Treasury has really worried about
protecting taxpayers," Stanton said, calling the approach "elegant."Freddie_mac_logo

Letting Fannie and Freddie fail
and take the entire U.S. housing market down with them, say the experts, was not an option.

Bond fund manager Bill Gross, co-investment chief of Pimco, said he
believes the bond market soon will "scream upwards in price and substantially lower
in yield" in what could be the most dramatic move in the
history of the mortgage market.

"I think the plan will likely make a profit for the taxpayer," Gross told CNNMoney.com.

Not a bad deal for F&F either: As part of the takeover plan, Paulson had the IRS issue Notice 2008-76,
which essentially allows the two government-sponsored enterprises to
retain all of their net-operating losses (NOLs), despite a change of
control of ownership.

Usually, notes CFO.com, Section 382 of the Internal Revenue Code says that NOLs are severely
limited when there is a change of control. The rule was designed to prevent acquiring companies from buying up targets just to gain access
to their NOLs.

In essence, reports CFO.com, Paulson changed tax law so that the two lenders aren’t paying more in
taxes to the government as a result of that same government becoming
their controlling investor.

"I am not saying that the IRS ruling is a good thing, or a bad thing,
it is just unusual," said tax expert Robert Willens. "Then again, this is a very
unusual situation."

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TAX-SAVVY WAYS 
TO WRAP UP 2026

It’s over! With October’s extended filing deadline behind us, it is now time to focus on year-end moves to reduce your 2026 tax bill. 

You’ll find ways to do just that on the Tax Tips page (see the More Tax Posts drop-down menu at the top of the blog), as well as the separate tax tip pages for each month, notably October through December. If you’re on the Tax Tips page, you’ll find a monthly list at the end of this column. If you’re on another blog page, you can head straight to the October tips; at the bottom of that tips page you’ll find links to all the other 11 months’ collections of tax advice.

Not to spoil what you’ll find in that tax advice, but it does cover such things as tax deductions for charitable donations, investment moves that could reduce tax due, and ways to max out your tax-favored retirement savings. 

Finally, as the year winds down, things get hectic. There are lots of other things to occupy our time, like the much more fun upcoming holidays. But don’t lose sight of taxes, since timing is key. To be of use, most tax moves must be made by the end of the tax year. That’s Thursday, Dec. 31, which also is the last business day of the year. 

So that you don’t miss that final tax year deadline, also keep an eye on the countdown clock below. It will keep you on top of just how much time is left to make important, tax-saving moves. (Note: I’m in the Central Time Zone, so adjust accordingly for where you live.)

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