Evening star., 1934-03-01
SLIM CHANCE SEEN
TO USE BANK LOSS
Jas TAX EXEMPTION
Only Proved Amounts Can
Be Deducted From U. S.
Income Returns.
CLAIM OF "BAD DEBTS"
is HARD TO ESTABLISH

some UmclalS Hold Uep0Slt0rS
Must Wait for Their
Final Dividends.
Thousands of depositors in the IA
banks which closed in Washington
during the past year stand only q
slim chance to charge of their losses
on the next income tax return to the
Federal Government. due March Is
for the year OF 1888.
Only losses which can be proven as
losses will be allowed, it was pointed
out by officials, and under the rules
and regulations some officials say tina:
depositors' losses cannot be finally
written off until the depositor receives
the last dividend from the banks re-
ceiver.
Proof Is Difficult.
positor will be allowed to make a
showing of loss, and claim a deduc-
ton on account of bad debts" but
1t Is known that this is an exceed
ingly difficult thing to prove. because
receivers of local banks will not give
any estimate as to how much the
depositor will get finally. and how
much the estimated net loss will be
To help answer the numerous per-
picking questions confronting the
stockholders and depositors in the IA
banks which closed during the past
year, The Star asked the Bureau of
Internal Revenue to clarity the situa-
ton.
In answer to this request, officials
prepared the following memorandum
"DepoSitors' losses:
Where bank is in charge of q
conservator for the purpose of reor-
ganization, and is not being liQuidated,
no determination can be made with
respect to the worthlessneSs of the
deposits. If the bank has reopened
and the depositors have waived a per-
centage of their deposits, for which
they receive an interest in certain as
sets OF the bank placed in trust for
their benefit, no determination can be
made with respect to the worthless
ness OF the portion of the deposits
waived until such time as the liquida-
tion of the trusteed assets is COM
pleted and it can be determined
what amount will be realized by the
depositors.
Bed Debt Deductions,
IF the receiver or other official
charge nf Iafi nc
has issued a statement indicating the
final approximate per cent of the de.
posits to be paid to the depositors
a depositor will be allowed a deduc-
ton as bad debt the amount of
his deposit in excess of the amount
to be received on final distribution.
Any distribution received subsequent
ly by depositor of the amount de-
Quoted in his return as a bad debt,
should be reported by the depositor
as income for the year in which such
distribution is received.
Where a bank is in process of
liquidation and a statement indicat-
ing the final approximate per cent
Of the deposits to be paid to the
depositors cannot be secured from
the official in charge of the iquida-
tion of the bank and the depositor
desires to take a deduction in his
income tax return on account of the
worthlessness of a portion of his de-
posit in the bank, the deduction
should be accompanied by such evi-
dence as set forth in article 191 of
regulations n in the case of bad
debts, as the depositor is of the opin-
ion substantiates his claim. The same
consideration will be given the tax
payers claim for the deduction, as
in the case of deduction for q
similar bad debt.
Losses on Stocks.
Stockholders losses:
In accordance with the provisions
OF article 174 of regulations n Il
stock of a corporation becomes worth
less, the cost or other basis may be
deducted by the owner for the tax
able year In which the stock became
worthless. provided a satisfactory
showing Of its worthlessness is made,
as in the case of bad debts. A show
ing that an insolvent bank is in
process of liquidation and is not in
process of reorganization, and by rea-
son of the assets of the bank being
insufficient to pay the creditors, the
additional liability provided by the
banking law has been assessed against
the stockholders, is a satisfactory
showing of the worthlessness OF
- - al
Of deduction by the stockholders o1
the cost or other basis Of such stock
The amount paid by the stockholders
because of their additional liability, te
the extent of any portion thereof
determined to be necessary to pay the
creditors, may also be deducted as q
loss by the stockholders for the year
in which such determination Is made
This determination may or may moi
be made before q bank Is completely
liquidated, depending upon the cir
cumstances of the particular. case. Any
portion Of the additional liability
assessment paid by a stockholder ir
order to assist in the reorganization
of a bank constitutes additional cost
of his stock in the bank, and Is moi
deductible"
To help taxpayers make out theil
returns staff of deputy collectors i.
on duty in the Bureau of InternaI
Revenue, in an Office near the corner
at Twelfth street and Constitution
avenue, where official advice will bt
given and notary public seal affixed
tree of charge.