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financial institutions. Section 581 provides a broad definition
for the term “bank”, while section 585 provides for the reserves
for losses on loans to banks. Section 581 provides:
SEC. 581. DEFINITION OF BANK.
For purposes of sections 582 and 584, the term
“bank” means a bank or trust company incorporated and
doing business under the laws of the United States
(including laws relating to the District of Columbia)
or of any State, a substantial part of the business of
which consists of receiving deposits and making loans
and discounts, or of exercising fiduciary powers
similar to those permitted to national banks under the
authority of the Comptroller of the Currency, and which
is subject by law to supervision and examination by
State, or Federal authority having supervision over
banking institutions. Such term also means a domestic
building and loan association.
Section 585 provides:
SEC. 585. RESERVES FOR LOSSES ON LOANS OF BANKS.
(a) Reserve for Bad Debts.--
(1) In general.--Except as provided in
subsection (c), a bank shall be allowed a
deduction for a reasonable addition to a reserve
for bad debts. Such deduction shall be in lieu of
any deduction under section 166(a).
(2) Bank.--For purposes of this section–-
(A) In general.--The term “bank” means
any bank (as defined in section 581) other
than an organization to which section 593
applies. [Emphasis added.]
Section 585 and former section 593 provided two different methods
for accounting for reserves for bad debts. Prior to the repeal
of the bad debt reserve method for thrift savings associations
under section 593, section 585 provided deductions for reasonable
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