IRS preserves tax deductions for losses of banks exiting TARP

Banks exiting the U.S. financial bailout program will be able to retain tax deductions for losses after the government sells its stakes in the companies, the Internal Revenue Service said today.

The ruling will prevent value of banks' shares from being discounted on concern the tax deductions may no longer apply after Treasury sells them, said Nayyera Haq, a Treasury Department spokeswoman.

"The guidance prevents the devaluing of common stock Treasury holds in TARP recipients," Haq said. "This guidance is the part of the administration's orderly exit from TARP."

The tax guidance issued today follows a similar ruling when the Treasury Department first took a stake in the banks. Under normal circumstances, a company can lose the ability to deduct losses when its ownership changes