IRS Mulling Section 597 Rule Changes in Response to Bank Failures

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IRS is grappling with much more complex lender vehicle structures than were ever anticipated under rules on transactions in which federal financial assistance is provided to banking institutions, William Alexander, associate chief counsel of the Internal Revenue Service, says. In the last generation of bank failures, the way that the losses were recovered was not a way that was anticipated by tax code Section 597, Alexander says. “The government would cover a certain percent normally in a particular pool, but not this tranche, that tranche, so many percent up to so many dollars … so we're taking a look at how to apply the regulatory regime to that kind of arrangement,” he says.