Rev. Rul. 68-3

Losses incurred by a bank with respect to deposits made by it in another bank may be deducted only under the specific charge-off method provided by section 166(a) of the Internal Revenue Code of 1954 and the regulations thereunder. These losses are rare and unpredictable in nature and do not arise in the normal course of the depositing bank's business of making loans and providing banking services. For these and other reasons the reserve method of accounting for bad debts under section 166(c) of the Code is not appropriate and may not be used with respect to losses on these deposits.

The term `bank' as used herein means a bank or trust company incorporated and doing business under the laws of the United States (including laws relating to the District of Columbia), of any State, or of any territory, a substantial part of the business of which consists of receiving deposits and making loans and discounts. Such term does not include a mutual savings bank not having capital stock represented by shares, a domestic building and loan association as defined in section 7701(a)(19) of the Code, or a cooperative bank as defined in section 7701(a)(32) of the Code.

Revenue Ruling 65-314, C.B. 1965-2, 51, is hereby superseded, since it is restated in this Revenue Ruling.