IRS Floats Rules on Regulated Financial Companies’ Bad Debt (1)

The IRS on Wednesday issued proposed rules on bad debt deductions for regulated financial companies and members of regulated financial companies.

The guidance, RIN 1545-BO11, would amend existing regulations under Sec. 166 of the US tax code to update the standard for determining when a debt instrument held by a regulated financial company or a member of a regulated financial company—such as some banks and insurance companies—will “conclusively” be deemed worthless.

Under Sec. 166 (a)(1) of the tax code, a bad debt is allowed when it becomes worthless in a taxable year.

• The agency said that in public ...