[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: 26CFR1.593-5]

[Page 346]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 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 Sec. 1.593-6A 
(relating to the experience method), and (ii) the amount determined 
under Sec. 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 Sec. 1.166-4 to be the reasonable addition 
to the reserve for losses on nonqualifying loans, and (ii) the amount 
determined under Sec. 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 Sec. 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 Sec. 1.593-9.

[T.D. 6728, 29 FR 5857, May 5, 1964, as amended by T.D. 549, 43 FR 
21455, May 18, 1978]