Rev. Rul. 65-172

Advice has been requested whether funds on deposit in Cuban banks which have not been officially expropriated by the Cuban Government are deductible by the taxpayer pursuant to section 165(a) of the Internal Revenue Code of 1954.

Taxpayer, a domestic corporation, has certain amounts of money deposited in various banks in Cuba. Since 1959, all efforts to withdraw this money have been futile.

Section 1.165-1(b) of the Income Tax Regulations provides that to be allowable as a deduction under section 165(a) of the Code a loss must be evidenced by closed and completed transactions, fixed by identifiable events, and actually sustained during the taxable year.

Revenue Ruling 62-197, C.B. 1962-2, 66, provides that acts of confiscation whether by way of seizure, intervention in, expropriation or similar taking of property, by the Cuban Government constitute identifiable events which, in the light of all of the circumstances, have resulted in closed and completed transactions notwithstanding promise of indemnification.

Placing the Cuban banks under the control of the Cuban Government and not permitting the money to be withdrawn has deprived the taxpayer of the use of the funds as well as the receipt of any interest earned thereon, with little chance of being compensated therefor.

Since these banks are acting in accordance with the orders of the Cuban Government, and since the refusal by the banks to remit the money on deposit when requested by the taxpayer is tantamount to a taking of property by the Cuban Government, a confiscation within the meaning of Revenue Ruling 62-197 occurs which results in a loss to the taxpayer.

Under the provisions of Revenue Ruling 62-197, the year of the loss may be established by whatever evidence is available, including evidence of a circumstantial nature, where there has been no officially published expropriation decree (or similar document).

Accordingly, it is held that the Cuban bank accounts are confiscated within the meaning of Revenue Ruling 62-197 where the Cuban Government, by decree or otherwise, acted and took control of the Cuban banks. A deduction pursuant to section 165(a) of the Code will be allowed with respect to losses timely claimed for the taxable year in which such action occurred.

Revenue Ruling 62-197, C.B. 1962-2, 66 is hereby amplified.