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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
reasons.
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
13(...continued)
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
Regs.).
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