Many rules in our tax law apply only to “banks,” as that term is defined in §581 of the Internal Revenue Code (the Code). Perhaps surprisingly, it is not always obvious whether an entity is or is not a “bank” within the meaning of that provision, and significant tax obligations may turn on that issue. A recent Tax Court case, MoneyGram International v. Commissioner,1 interprets and applies the statutory definition in the context of special provisions providing liberal rules under which “banks” may claim deductions for bad debts.
Background
MoneyGram International and its subsidiaries (collectively, MoneyGram) provided payment services to consumers and financial institutions. In the case of its consumer-oriented business, MoneyGram sold money orders and provided money transfer services through a variety of agents, including banks, credit unions, supermarkets, convenience stores, and other retail businesses.
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