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can be reasonably estimated. This option may be elected as an
alternative to the bad debt provisions of section 166, which treat
a loss on a deposit in an insolvent financial institution as a
short-term capital loss deductible only in the year in which there
is no reasonable prospect of recovery. Electing casualty loss
treatment forecloses any section 166 bad debt deduction. An
individual's election of casualty loss treatment applies to all of
the individual's deposits in the same financial institution.
Section 165(l) provides, in pertinent part, as follows:
(l) Treatment of Certain Losses in Insolvent
Financial Institutions.--
(1) In general.--If--
(A) as of the close of the taxable
year, it can reasonably be estimated that
there is a loss on a qualified
individual's deposit in a qualified
financial institution, and
(B) such loss is on account of the
bankruptcy or insolvency of such
institution,
then the taxpayer may elect to treat the amount so
estimated as a loss described in subsection (c)(3)
incurred during the taxable year.
* * * * * * *
(3) Qualified financial institution.--
For purposes of this subsection, the term
"qualified financial institution" means--
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