Citigroup Gets to Keep $38B of Loss Deductions

Friday, the Internal Revenue Service suspended the present law Section 382 denial of loss deductions in the event of a “takeover” of a financial institution by Treasury via its investment of TARP funds. This will allow Citigroup (C) to keep $38 b. of loss deductions. A Treasury spokesman said Section 382 was never intended to take away losses when the takeover was by the government. True enough. Section 382 was intended to stop corporate raiders from taking over unprofitable firms just for their tax deductions of in the 1980’s. Nonetheless, this is a back door way for Treasury to capitalize financial institutions. It just goes to show, that when circumstances change dramatically, the law changes with them. This morning’s Washington Post article lays it all out.

About Pete Davis 99 Articles

Affiliation: Davis Capital Investment Ideas

Pete Davis advises Wall Street money managers on Washington policy developments that affect the financial markets. President of his own consulting firm since 1992, Davis Capital Investment Ideas, he draws on 11 years of experience as a Capitol Hill economist with the Joint Committee on Taxation (1974-1981), the Senate Budget Committee (1981-1983), and Senator Robert C. Byrd (1992). He worked in the House and Senate, and for Republicans and Democrats.

Davis brought the first computer policy model, the Treasury Individual Income Tax Model, to Capitol Hill in early 1974, when he became a revenue estimator on the Joint Committee on Taxation. He formulated the 1975 rebate, the earned income tax credit, the 1976 estate tax rates, the 1978 marginal tax rates, and the Roth-Kemp tax cut. He left Capitol Hill in 1983 for the Washington Research Office of Prudential-Bache Securities, where he advised investors for seven years.

Davis has long written a newsletter on the Washington-Wall Street connection for his clients; Capital Gains and Games is his first foray into the blogosphere.

Visit: Capital Gains and Games

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