Cordes Finance Corporation - Page 16

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                deferred interest of $1,596,968 more than the amount                                     
                recorded on petitioner's loan ledger cards.  In order to                                 
                reconcile this discrepancy, and to bring the balance of                                  
                petitioner's deferred interest account in line with the                                  
                ending balance computed by respondent from petitioner's                                  
                loan ledger cards, viz $3,091,395.88, respondent increased                               
                petitioner's income in the amount of $1,596,968.  The                                    
                effect of both elements of respondent's adjustment on                                    
                petitioner's deferred interest account can be summarized                                 
                as follows:                                                                              

                      Deferred interest--ending                                                          
                      balance per tax return                     $7,772,543.00                           
                      Less: Earned interest                                                              
                      per respondent                             3,084,179.12                            
                      Less: Amount to reconcile                                                          
                      discrepancy in deferred                                                            
                      interest amount                            1,596,968.00                            
                      Deferred interest--ending                                                          
                      balance per loan ledger cards              3,091,395.88                            

                      Petitioner objects to the second element of                                        
                respondent's adjustment.  Petitioner's position is that                                  
                this element has the effect of requiring petitioner to                                   
                include in its income for 1990 interest that would                                       
                otherwise not accrue until after 1990.  Petitioner's                                     
                post-trial brief states as follows:                                                      

                      The Commissioner's proposed method of accounting                                   
                      requires that any interest which has not already                                   
                      been recognized and which could possibly be                                        
                      earned at any time in the future on any contract                                   




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