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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,
supra:
As we have noted [citation omitted], the common
(continued...)
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