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DS News December 2022

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69 69 69 INVESTMENT GOVERNMENT PROPERTY PRESERVATION Journal Follow Us At: @DSNewsDaily FHFA ANNOUNCES REVISED DEEMED-ISSUANCE RATIO FOR 2023 e Federal Housing Finance Agency (FHFA) has announced the deemed-issuance ratio for the 2023 calendar year in accor- dance with Internal Revenue Service (IRS) guidelines on the trading of the Uniform Mortgage-Backed Security (UMBS). e deemed-issuance ratio will be utilized for diver- sification reporting on the bonds delivered to the purchaser until the bonds have been disposed of, regardless of the issuing government-sponsored enterprise (GSE) on the underlying bonds. e FHFA announces this ratio annually at least three weeks prior to the affected calendar year. e IRS Revenue Procedure 2018-54 provides that the ratio may be rounded as long as the rounded ratio is further from 50/50 than the actual observed data. erefore, the deemed-is- suance ratio for the 2023 calendar year is 53% Fannie Mae and 47% Freddie Mac. e IRS procedure provides guidance on Section 817(h) of the Internal Revenue Code diversification requirements for variable annuity, endowment, and life insurance contracts. e IRS has provided a deemed-issuance ratio to allocate issuer exposure for TBA trades between the Enterprises. Compliance with these require- ments is impacted by the implementation of and trading in UMBS. Revenue Procedure 2018-54 calls for FHFA to determine a deemed-issuance ratio for each calendar year based on the ratio of TBA-eligible securities issued by Fannie Mae and Freddie Mac during the 24-month period ending Octo- ber 31 of the preceding year. Revenue Procedure 2018-54 provides guidance and procedural rules for taxpayers that hold investments in one or more segregated asset accounts on which variable contracts are based. e guidance and rules allow these taxpayers to elect to treat certain mortgage-backed securities as having deemed issuers for purposes of the diversification requirements of Section 817(h) of the IRS.

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