Wider reach feared for market value accounting.

WASHINGTON - Accounting experts are advising all banks to comply with a new IRS rule requiring mark-to-market accounting by securities de

Bankers will have to designate which assets they hold for sale by Sept.(9.) They would then have to compute unrealized gains and losses on those assets for 1993.

Though the tax impact is expected to be minimal for most banks, some groups complain of a compliance nightmare.

Many bankers thought the provision would affect only banks like Bankers Trust and J.P. Morgan, which are heavily engaged in the securities business. But the IRS is applying the regulation to loans and other bank assets as well.

Worse than Expected

"No one thought they'd be this vigorous," said Henry Ruempler, the American Bankers Association's resident tax expert.

Knowledgeable sources said the IRS and Treasury will issue a more authoritative statement as early as next week to clarify the rule.

It is expected to note that banks that just make loans and hold them will not be affected. Banks that frequently sell mortgages into the secondary markets will have to comply. Banking trade groups were swamped with inquiries after informing their members that the IRS provision might extend to more typical banks as well.

The American Bankers Association, which alerted its members by fax last Thursday, said it received 600 phone calls that day and hundreds more on Friday.

IBAA Fighting Back

Kenneth Guenther, executive vice president of the Independent Bankers Association of America said the IRS rule is a disastrous proposal, and he began waging an all- out campaign to have the rule delayed for further discussion.

In a protest letter fired off Wednesday to Treasury Under Secretarv Frank Newman, Mr. Guenther said the controversial section of the law applies to "dealers in securities" and doesn't refer to banks.

"It provides no notice and little if any support for an extension of technical and burdensome compliance requirements to the nation's community banks."

Farm Loans Cited

In a letter to his members, Mr. Guenther said the rule would negatively impact bank loans to small businesses and farms. He also complained that the IRS rule is inconsistent with a mark-to-market statement recently issued by the Financial Accounting Standards Board.

"If community banks are forced to report under two different systems, it will further strain their modest resources and add to their regulatory burdens," he complained to Mr. Newman.

"People can't play totally dumb on this," said Marc Levy, a partner in Arthur Andersen's federal tax practice here. Mr. Levy said last year's vetoed tax bill contained an identical provision and its legislative history contained illustrations showing that banks would subject to it.

Early Warning

And Mr. Ruempler said a Treasury official warned that it would apply to banks in a speech to lawyers earlier this year.

"Still, it's safe to say not many of the potentially affected taxpayers realized this was out there or that it could apply to them," Mr. Levy said.

Mr. Levy said the IRS might eventually clarify the law and the way it applies to banks.

It's not that involved. Just make sure you can say on any given day in your general ledger which assets are held for sale and which are not."

The easiest way for most banks, he said, is to state that every security is held for investment or not for sale, unless otherwise stated.

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