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Bad Debt Chargeoffs / Conclusive Presumption of Worthlessness

The IRS is challenging tax deductions that banks are taking under Treas. Reg. section 1.166-2(d)(1). The issue is what type of proof a bank is required to show the IRS in order to take advantage of the tax deduction benefit in the regulations.

ABA's Position

The IRS's current position makes it impossible for banks to actually use Treas. Reg. section 1.166-2(d)(1). There is a disconnect between the IRS and the banking regulatory agencies on what type of proof a bank must provide in order to use the regulations. Because the different agencies have different policies on this issue, it is impossible to establish one standard that would apply to all banks.

​Contact for further information: John Kinsella (202) 663-5317.


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