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Electronic Code of Federal Regulations
Title 26: Internal Revenue
§1.593-5 Addition to reserves for bad debts.
(a) Amount of addition. As an alternative to a deduction from gross income under section 166(a) for specific debts which become worthless in whole or in part, a thrift institution is allowed a deduction under section 166(c) for a reasonable addition to a reserve for bad debts. In the case of a thrift institution, the amount of the reasonable addition to such reserve for a taxable year may not exceed:
(1) For taxable years beginning after July 11, 1969, the sum of (i) the amount determined to be the reasonable addition to the reserve for losses on nonqualifying loans, determined in the same manner as is provided with respect to additions to the reserve for losses on qualifying real property loans under paragraph (d) of §1.593-6A (relating to the experience method), and (ii) the amount determined under §1.593-6A to be the reasonable addition to the reserve for losses on qualifying real property loans, or
(2) For taxable years beginning before July 12, 1969, the sum of (i) the amount determined under §1.166-4 to be the reasonable addition to the reserve for losses on nonqualifying loans, and (ii) the amount determined under §1.593-6 to be the reasonable addition to the reserve for losses on qualifying real property loans.
(b) Crediting to reserves required—(1) In general. The amounts referred to in paragraph (a) (1) and (2) of this section must be credited, respectively, to the reserve for losses on nonqualifying loans and to the reserve for losses on qualifying real property loans by the close of the taxable year, or as soon as practicable thereafter. For rules with respect to accounting for such reserves see paragraph (a)(2) of §1.593-7.
(2) Subsequent adjustments. If an adjustment with respect to the income tax return for a taxable year is made, and if such adjustment (whether initiated by the taxpayer or the Commissioner) has the effect of permitting an increase, or requiring a reduction, in the amount claimed on such return as an addition to the reserve for losses on nonqualifying loans or to the reserve for losses on qualifying real property loans, then the amount initially credited to such reserve for such year pursuant to subparagraph (1) of this paragraph may have to be increased or decreased, as the case may be, to the extent necessary to reflect such adjustment.
(c) Transition year. For rules governing the computation of taxable income in the case of a taxable year beginning in 1962 and ending in 1963, see §1.593-9.
[T.D. 6728, 29 FR 5857, May 5, 1964, as amended by T.D. 549, 43 FR 21455, May 18, 1978]