NEW YORK — Citigroup's bid to boost its equity capital could result in the federal government raising its stake in the troubled bank this week to as much as 40 percent, a person familiar with the talks said.

Citigroup already has received $45 billion in U.S. bailout money made up primarily of debt-like preferred shares, plus federal guarantees to cover losses on some $300 billion in risky investments. It also has transferred control of its Smith Barney brokerage to Morgan Stanley in return for $2.7 billion, and has prepared for more asset sales by splitting in two — effectively undoing the merger that created Citigroup.

But the New York-based bank has been involved in talks with regulators over ways the government could help strengthen the bank further. While a deal is unlikely to be announced early today, it could be hammered out within days, the person said Wednesday.

While the exact details of the talks aren't known, they could center on the terms of converting the government's $45 billion in preferred shares into common equity. The preferred shares carry a high interest rate, requiring a yearly payout of billions in coupon payments. But if converted to common stock, Citi's annual dividend payout would be minimal since it's been cut to just 4 cents per share.

Citigroup's talks continue as the Obama administration prepares to administer "stress tests" to 19 of the nation's largest banks to gauge whether each institution has adequate capital to survive a severe downturn.