The Internal Revenue Service (?IRS?) reacted in a surprisingly swift manner to the current volatile environment for U.S. banks, the existence and ownership of which has been changing on a daily basis. On September 30, the IRS issued Notice 2008-83, 2008-42 I.R.B. 1 (the ?Notice?), in which it announced that losses and deductions attributable to loans or bad debts of a bank (including any deduction for a reasonable addition to a reserve for bad debts) that are otherwise allowable after the date of an ownership change under Section 382 of the Internal Revenue Code (the ?Code?), will not be treated as built-in losses or deductions attributable to a pre-change period. The Notice effectively removes a potential barrier to bringing in new equity ownership of a struggling bank by assuring taxpayer banks that the IRS does not intend to challenge otherwise allowable deductions as being attributable to pre-ownership change periods.
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Finance & Banking Updates, Tax Law Updates
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