U.S. Bancorp, Successor In Interest to West One Bancorp and Subsidiaries, formerly known as Moore Financial Group, Inc. - Page 16

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          Court in Security Bank Minn. was aware that the loans might, in             
          respondent's view, have been issued with OID, for the following             
               First, although it is true that respondent, in Security Bank           
          Minn. v. Commissioner, supra, did not take the position that the            
          bank loans there at issue had OID, this is not the "whole truth".           
          In the very next breath, respondent then told the Court that                
          those bank loans "arguably did" have OID--notwithstanding the               
          previous disclaimer.  Security Bank Minn. v. Commissioner, 98               
          T.C. at 37-38.                                                              
               Second, under respondent's 1986 proposed regulations                   
          interpreting the OID rules,14 all short-term obligations would be           

               thread of the sections included in Part V * * * [of                    
               Subchapter P of Chapter 1 of the Code, which Part                      
               contains the original issue discount (OID), market                     
               discount, and discount on short-term obligation rules]                 
               is that amounts defined as discount are to be taken                    
               into account as ordinary income in some appropriate                    
               manner.  Thus the obligations or instruments to which                  
               Part V applies are obligations or instruments that                     
               involve some sort of discount--in the case of section                  
               1281, acquisition discount (or, by operation of section                
               1283(c)(1)(A), original issue discount).  There is no                  
               indication that any of the loans here in dispute                       
               involve discount * * *.  [Security Bank Minn. v.                       
               Commissioner, 98 T.C. at 41-42; emphasis added.]                       
               14 Secs. 1.1271-1 through 1.1275-5, Proposed Income Tax                
          Regs., 51 Fed. Reg. 12048-12096 (Apr. 8, 1986) (the 1986 Proposed           

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