8721 / What is a qualified insolvent financial institution loss? Can a taxpayer treat such a loss as a casualty loss?

Prior to 2018, a taxpayer could choose to treat a qualified insolvent financial institution loss as a casualty loss if it could be ascertained with reasonable certainty that there was a loss on a qualified individual’s deposit in a qualified financial institution and that the loss was caused by the bankruptcy or insolvency of that institution.[1] “Deposit” for this purpose means any deposit, withdrawable account or withdrawable or repurchasable share.²

The term “qualified individual” is defined by exclusion as any individual other than an individual who:

(1)  owns at least 1 percent of the outstanding stock of the qualified institution;

(2)  is an officer of the qualified institution; or