[Code of Federal Regulations]
[Title 26, Volume 7]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.593-2]

[Page 345]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.593-2  Additions to reserve for bad debts where surplus, reserves, 

and undivided profits equal or exceed 12 percent of deposits or 
withdrawable accounts.

    Where 12 percent of the total deposits or withdrawable accounts of 
an institution at the close of the taxable year is equal to or less than 
the sum of such institution's surplus, undivided profits, and reserves 
at the beginning of the taxable year, a reasonable addition to the 
reserve for bad debts as determined under the general provisions of 
section 166(c) may be allowable as a deduction from gross income. In 
making such determination, there shall be taken into account (a) surplus 
or bad debt reserves existing at the close of December 31, 1951 (i.e., 
the amount of surplus, undivided profits, and reserves accumulated prior 
to January 1, 1952, and in existence at the close of December 31, 1951), 
and (b) changes in the surplus, undivided profits, and reserves of the 
institution from December 31, 1951, until the beginning of the taxable 
year. A deduction for an addition to the reserve for bad debts pursuant 
to this section will be authorized only in those cases where the 
institution proves to the satisfaction of the Commissioner that the bad 
debt experience of the institution warrants an addition to the reserve 
for bad debts in excess of that provided in paragraph (b) of Sec. 
1.593-1. For definitions, see paragraph (d) of Sec. 1.593-1.