Tax Considerations for FHLB Stock Redemptions

Financial Institutions

December 28, 2015
by Traci Hollister, CPA, Lindsey Sabelko, CPA

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Traci Hollister Traci Hollister, CPA

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Lindsey Sabelko Lindsey Sabelko, CPA

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With the Federal Home Loan Bank of Chicago’s (FHLB’s) new capital structure in place, many financial institutions have had the opportunity to request that their excess capital stock or a portion of it be repurchased—an option that hasn’t been available since April 24, 2008.  While this achieves a long-time goal of the FHLB to return full liquidity to members’ investments, management should pause and reflect on potential tax implications given the nature and types of dividends that have been granted over the holding period of the stock—cash AND stock.

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