U.S. Bancorp, Successor In Interest to West One Bancorp and Subsidiaries, formerly known as Moore Financial Group, Inc. - Page 15

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          obligors with OID.  By contrast, in Security Bank Minn., the                
          Commissioner deliberately decided not to assert that the relevant           
          bank loans had OID.  Security Bank Minn. v. Commissioner, 98 T.C.           
          at 37-38.  Respondent argues that this distinction is important,            
          because the Court in Security Bank Minn. assumed in reaching its            
          decision that the bank loans there in question were not                     
          "discount" obligations.                                                     
               As a result, argues respondent, our decision in Security               
          Bank Minn. v. Commissioner, supra, does not determine the outcome           
          of this case.  Although Security Bank Minn. may prevent the                 
          accrual of interest, under section 1281(a)(2) of the short-term             
          obligation rules, it does not, in respondent's view, prevent the            
          accrual of discount, under section 1281(a)(1) of those rules.12             
          Therefore, concludes respondent, accrual is appropriate with                
          respect to the loans and deposits held by IFNB in this case.                
               In response to this argument, we note that there is language           
          in Security Bank Minn. v. Commissioner, supra, that could be read           
          to suggest that the Court believed the bank loans there at issue            
          had no discount, and that this belief was important to the                  
          result.13  Notwithstanding this language, however, we believe the           

               12 These Code provisions are discussed supra pp. 8-9.                  
               13 As we stated in Security Bank Minn. v. Commissioner,                
                    As we have noted [citation omitted], the common                   

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