California Code, Revenue and Taxation Code - RTC § 24965

In the case of a share of stock issued pursuant to Section 303(c) of the Federal National Mortgage Association Charter Act (12 U.S.C., Sec. 1718), the basis of such share in the hands of the initial holder shall be an amount equal to the capital contributions evidenced by such share reduced by the amount (if any) required by Section 24343(d) to be treated (with respect to such share) as ordinary and necessary expenses paid or incurred in carrying on a trade or business.