
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC582]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
                   Subchapter H--Banking Institutions
 
Sec. 582. Bad debts, losses, and gains with respect to 
        securities held by financial institutions
        

(a) Securities

    Notwithstanding sections 165(g)(1) and 166(e), subsections (a) and 
(b) of section 166 (relating to allowance of deduction for bad debts) 
shall apply in the case of a bank to a debt which is evidenced by a 
security as defined in section 165(g)(2)(C).

(b) Worthless stock in affiliated bank

    For purposes of section 165(g)(1), where the taxpayer is a bank and 
owns directly at least 80 percent of each class of stock of another 
bank, stock in such other bank shall not be treated as a capital asset.

(c) Bond, etc., losses and gains of financial institutions

                          (1) General rule

        For purposes of this subtitle, in the case of a financial 
    institution referred to in paragraph (2), the sale or exchange of a 
    bond, debenture, note, or certificate or other evidence of 
    indebtedness shall not be considered a sale or exchange of a capital 
    asset. For purposes of the preceding sentence, any regular or 
    residual interest in a REMIC, and any regular interest in a FASIT, 
    shall be treated as an evidence of indebtedness.

      (2) Financial institutions to which paragraph (1) applies

        (A) In general

            For purposes of paragraph (1), the financial institutions 
        referred to in this paragraph are--
                (i) any bank (and any corporation which would be a bank 
            except for the fact it is a foreign corporation),
                (ii) any financial institution referred to in section 
            591,
                (iii) any small business investment company operating 
            under the Small Business Investment Act of 1958, and
                (iv) any business development corporation.

        (B) Business development corporation

            For purposes of subparagraph (A), the term ``business 
        development corporation'' means a corporation which was created 
        by or pursuant to an act of a State legislature for purposes of 
        promoting, maintaining, and assisting the economy and industry 
        within such State on a regional or statewide basis by making 
        loans to be used in trades and businesses which would generally 
        not be made by banks within such region or State in the ordinary 
        course of their business (except on the basis of a partial 
        participation), and which is operated primarily for such 
        purposes.

        (C) Limitations on foreign banks

            In the case of a foreign corporation referred to in 
        subparagraph (A)(i), paragraph (1) shall only apply to gains and 
        losses which are effectively connected with the conduct of a 
        banking business in the United States.

(Aug. 16, 1954, ch. 736, 68A Stat. 202; Pub. L. 85-866, title I, 
Sec. 34, Sept. 2, 1958, 72 Stat. 1632; Pub. L. 91-172, title IV, 
Sec. 433(a), (c), Dec. 30, 1969, 83 Stat. 623, 624; Pub. L. 94-455, 
title X, Sec. 1044(a), title XIV, Sec. 1402(b)(1)(G), (2), Oct. 4, 1976, 
90 Stat. 1642, 1732; Pub. L. 98-369, div. A, title X, Sec. 1001(b)(6), 
(e), July 18, 1984, 98 Stat. 1011, 1012; Pub. L. 99-514, title VI, 
Sec. 671(b)(4), title IX, Sec. 901(d)(3), Oct. 22, 1986, 100 Stat. 2318, 
2379; Pub. L. 100-647, title I, Sec. 1008(d)(3), Nov. 10, 1988, 102 
Stat. 3439; Pub. L. 101-508, title XI, Sec. 11801(a)(25), (c)(11), Nov. 
5, 1990, 104 Stat. 1388-521, 1388-527; Pub. L. 104-188, title I, 
Sec. 1621(b)(4), Aug. 20, 1996, 110 Stat. 1867.)

                       References in Text

    The Small Business Investment Act of 1958, referred to in subsec. 
(c)(2)(A)(iii), is Pub. L. 85-699, Aug. 21, 1958, 72 Stat. 689, as 
amended, which is classified principally to chapter 14B (Sec. 661 et 
seq.) of Title 15, Commerce and Trade. For complete classification of 
this Act to the Code, see Short Title note set out under section 661 of 
Title 15 and Tables.


                               Amendments

    1996--Subsec. (c)(1). Pub. L. 104-188 inserted ``, and any regular 
interest in a FASIT,'' after ``REMIC''.
    1990--Subsec. (c)(1). Pub. L. 101-508, Sec. 11801(c)(11)(A), 
substituted ``paragraph (2)'' for ``paragraph (5)''.
    Subsec. (c)(2). Pub. L. 101-508, Sec. 11801(a)(25), (c)(11)(B), 
redesignated par. (5) as (2) and struck out former par. (2) 
``Transitional rule for banks'' which read as follows: ``In the case of 
a bank, if the net long-term capital gains of the taxable year from 
sales or exchanges of qualifying securities exceed the net short-term 
capital losses of the taxable year from such sales or exchanges, such 
excess shall be considered as gain from the sale of a capital asset held 
for more than 6 months to the extent it does not exceed the net gain on 
sales and exchanges described in paragraph (1).''
    Subsec. (c)(3). Pub. L. 101-508, Sec. 11801(a)(25), struck out par. 
(3) ``Special rules'' which read as follows: ``For purposes of this 
subsection--
        ``(A) The term `qualifying security' means a bond, debenture, 
    note, or certificate or other evidence of indebtedness held by a 
    bank on July 11, 1969.
        ``(B) The amount treated as capital gain or loss from the sale 
    or exchange of a qualifying security shall be determined by 
    multiplying the amount of capital gain or loss from the sale or 
    exchange of such security (determined without regard to this 
    subsection) by a fraction, the numerator of which is the number of 
    days before July 12, 1969, that such security was held by the bank, 
    and the denominator of which is the number of days the security was 
    held by the bank.''
    Subsec. (c)(4). Pub. L. 101-508, Sec. 11801(a)(25), struck out par. 
(4) ``Transitional rule for banks'' which read as follows: ``In the case 
of a corporation which would be a bank except for the fact that it is a 
foreign corporation, the net gain, if any, for the taxable year on sales 
and exchanges described in paragraph (1) shall be considered as gain 
from the sale or exchange of a capital asset to the extent such net gain 
does not exceed the portion of any capital loss carryover to such 
taxable year which is attributable to capital losses on sales or 
exchanges described in paragraph (1) for a taxable year beginning before 
July 12, 1969. For purposes of the preceding sentence, the portion of a 
net capital loss for a taxable year which is attributable to capital 
losses on sales or exchanges described in paragraph (1) is the amount of 
the net capital loss on such sales or exchanges for such taxable year 
(but not in excess of the net capital loss for such taxable year).''
    Subsec. (c)(5). Pub. L. 101-508, Sec. 11801(c)(11)(B), redesignated 
par. (5) as (2).
    1988--Subsec. (a). Pub. L. 100-647 substituted ``subsections (a) and 
(b) of section 166'' for ``subsections (a), (b), and (c) of section 
166''.
    1986--Subsec. (c)(1). Pub. L. 99-514, Sec. 901(d)(3)(A), substituted 
``referred to in paragraph (5)'' for ``to which section 585, 586, or 593 
applies''.
    Pub. L. 99-514, Sec. 671(b)(4), inserted ``For purposes of the 
preceding sentence, any regular or residual interest in a REMIC shall be 
treated as an evidence of indebtedness.''
    Subsec. (c)(5). Pub. L. 99-514, Sec. 901(d)(3)(B), added par. (5).
    1984--Subsec. (c)(2). Pub. L. 98-369 substituted ``6 months'' for 
``1 year'', applicable to property acquired after June 22, 1984, and 
before Jan. 1, 1988. See Effective Date of 1984 Amendment note below.
    1976--Subsec. (c)(2). Pub. L. 94-455, Sec. 1402(b)(2), provided that 
``9 months'' would be changed to ``1 year''.
    Pub. L. 94-455, Sec. 1402(b)(1)(G), (2), provided that ``6 months'' 
would be changed to ``9 months'' for taxable years beginning in 1977.
    Subsec. (c)(4). Pub. L. 94-455, Sec. 1044(a), added par. (4).
    1969--Pub. L. 91-172, Sec. 433(c), substituted ``Bad debts, losses, 
and gains with respect to securities held by financial institutions'' 
for ``Bad debt and loss deduction with respect to securities held by 
banks'' in section catchline.
    Subsec. (c). Pub. L. 91-172, Sec. 433(a), redesignated existing 
provisions as par. (1), inserted reference to sections 585, 586 and 593, 
and added pars. (2) and (3).
    1958--Subsec. (c). Pub. L. 85-866 struck out ``with interest coupons 
or in registered form,'' before ``exceed the gains''.


                    Effective Date of 1996 Amendment

    Amendment by Pub. L. 104-188 effective Sept. 1, 1997, see section 
1621(d) of Pub. L. 104-188, set out as a note under section 26 of this 
title.


                    Effective Date of 1988 Amendment

    Amendment by Pub. L. 100-647 effective, except as otherwise 
provided, as if included in the provision of the Tax Reform Act of 1986, 
Pub. L. 99-514, to which such amendment relates, see section 1019(a) of 
Pub. L. 100-647, set out as a note under section 1 of this title.


                    Effective Date of 1986 Amendment

    Amendment by section 671(b)(4) of Pub. L. 99-514 effective Jan. 1, 
1987, see section 675(a) of Pub. L. 99-514, as amended, set out as an 
Effective Date note under section 860A of this title.
    Amendment by section 901(d)(3) of Pub. L. 99-514 applicable to 
taxable years beginning after Dec. 31, 1986, see section 901(e) of Pub. 
L. 99-514, set out as a note under section 166 of this title.


                    Effective Date of 1984 Amendment

    Amendment by Pub. L. 98-369 applicable to property acquired after 
June 22, 1984, and before Jan. 1, 1988, see section 1001(e) of Pub. L. 
98-369, set out as a note under section 166 of this title.


                    Effective Date of 1976 Amendment

    Section 1044(b) of Pub. L. 94-455, as amended by Pub. L. 99-514, 
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
    ``(1) The amendment made by subsection (a) [amending this section] 
shall apply with respect to taxable years beginning after July 11, 1969.
    ``(2) If the refund or credit of any overpayment attributable to the 
application of the amendment made by subsection (a) to any taxable year 
is otherwise prevented by the operation of any law or rule of law (other 
than section 7122 of the Internal Revenue Code of 1986 [formerly I.R.C. 
1954], relating to compromises) on the day which is one year after the 
date of the enactment of this Act [Oct. 4, 1976], such credit or refund 
shall be nevertheless allowed or made if claim therefor is filed on or 
before such day.''
    Section 1402(b)(1) of Pub. L. 94-455 provided that amendment made by 
that section is effective with respect to taxable years beginning in 
1977.
    Section 1402(b)(2) of Pub. L. 94-455 provided that the amendment 
made by that section is effective with respect to taxable years 
beginning after Dec. 31, 1977.


                    Effective Date of 1969 Amendment

    Section 433(d) of Pub. L. 91-172, as amended by Pub. L. 99-514, 
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
    ``(1) In general.--The amendments made by this section [amending 
this section and section 1243 of this title] shall apply to taxable 
years beginning after July 11, 1969.
    ``(2) Election for small business investment companies and business 
development corporations.--Notwithstanding paragraph (1), in the case of 
a financial institution described in section 586(a) of the Internal 
Revenue Code of 1986 [formerly I.R.C. 1954], the amendments made by this 
section [amending this section and section 1243 of this title] shall not 
apply for its taxable years beginning after July 11, 1969, and before 
July 11, 1974, unless the taxpayer so elects at such time and in such 
manner as shall be prescribed by the Secretary of the Treasury or his 
delegate. Such election shall be irrevocable and shall apply to all such 
taxable years.''


                    Effective Date of 1958 Amendment

    Amendment by Pub. L. 85-866 applicable to taxable years beginning 
after Dec. 31, 1953, and ending after Aug. 16, 1954, see section 1(c)(1) 
of Pub. L. 85-866, set out as a note under section 165 of this title.


                            Savings Provision

    For provisions that nothing in amendment by Pub. L. 101-508 be 
construed to affect treatment of certain transactions occurring, 
property acquired, or items of income, loss, deduction, or credit taken 
into account prior to Nov. 5, 1990, for purposes of determining 
liability for tax for periods ending after Nov. 5, 1990, see section 
11821(b) of Pub. L. 101-508, set out as a note under section 29 of this 
title.

                  Section Referred to in Other Sections

    This section is referred to in sections 166, 172, 581, 856, 1236 of 
this title.
