Rev. Rul. 63-44

The Internal Revenue Service acquiesces in the decision of the Tax Court of the United States in Ancel Greene and Company v. Commissioner , 38 T.C. 125 (1962). See page 4 of this Bulletin.

After finding that the taxpayer, which had sold mortgages to the Federal National Mortgage Association (FNMA) during three previous taxable years, received payment for the mortgages partly in cash and partly in stock of the Association, the court held that the amount includible in the income of the taxpayer from the receipt of the stock was the fair market value of the shares on the date of issue to it.

The court held further that shares of FNMA stock sold by the taxpayer during 1957 and 1958 were capital assets at the time of disposition and that the gain or loss upon such sales should be computed by using as the basis of each share sold, the fair market value of such share on the date of issue to the taxpayer. The court's opinion indicates that its finding that the taxpayer held the FNMA stock as an investment at the time of sale was based, in part, upon the length of time the shares had been held by the taxpayer.

Revenue Ruling 58-41, C.B. 1958-1, 86, is hereby revoked. Cases involving the same issues, in which the issuance of FNMA stock occurred in taxable years beginning prior to January 1, 1960, which are now pending, will be disposed of on the basis of the Ancel Greene decision.

The Ancel Greene case has no application to transactions involving the issuance of FNMA stock during taxable years beginning after December 31, 1959, since such transactions are governed by the provisions of section 8 of Public Law 86-779, September 14, 1960, C.B. 1960-2, 709, which added new sections 162(d) and 1054 to the Internal Revenue Code of 1954.

¹ Based on Technical Information Release 385, dated June 19, 1962.