- 19 -
respondent's proposed application of section 1281(a)(1) presented
an issue of first impression in Security State Bank v.
Commissioner, 111 T.C. at 214. However, after examining our
approach in Security Bank Minn., we concluded in Security State
Bank v. Commissioner, supra, that:
Our analysis in Security Bank Minn. v.
Commissioner, supra, makes clear that we have
interpreted section 1281 as having no application
to loans made by banks in the ordinary course of
business, regardless of whether the loans are
characterized as generating interest or original issue
discount. We, therefore, hold that section 1281(a)(1)
does not apply to the loans in issue. [Id. at 215; fn.
ref. omitted.]
In the case at hand, we follow Security Bank Minn. v.
Commissioner, supra, as explained by Security State Bank v.
Commissioner, supra, to hold that no accrual is required under
section 1281(a)(1) with respect to IFNB's consumer, commercial,
and agricultural short-term loans to its customers.
V. Respondent's Third Argument: IFNB's Time Deposits and
CD's Are Not "Bank Loans Made to Customers"
As an alternative to the foregoing arguments, which relate
to all the short-term obligations held by IFNB during the years
at issue, respondent makes a third argument, which applies only
to IFNB's time deposits and CD's, the obligors of which were
other banks.
In essence, respondent asserts that even if Security Bank
Minn. v. Commissioner, supra, and Security State Bank v.
Commissioner, supra, were properly decided, the legal standard we
Page: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 NextLast modified: May 25, 2011