- 20 -
announced in those cases does not apply to the time deposits and
CD's in this case.
According to respondent, our precise holding in Security
Bank Minn. v. Commissioner, supra, was that section 1281 does not
apply with respect to short-term loans made by a bank to its
customers in the ordinary course of its business. Respondent
asserts that IFNB's time deposits and CD's do not constitute
"loans made to customers", as that term was employed by Security
Bank Minn. (and Security State Bank v. Commissioner, supra).
Therefore, argues respondent, our holdings in those cases do not
apply to IFNB's short-term time deposits and CD's, even if we
decide that the holdings do apply to IFNB's loans (as we have
done). As a result, concludes respondent, the short-term
obligation rules can be applied to IFNB's short-term time
deposits and CD's, without violating either the spirit or the
letter of Security Bank Minn. (or Security State Bank).
In support of this argument, respondent notes that the Court
in Security Bank Minn. v. Commissioner, supra, considered in some
detail the meanings of the words "acquire" and "issue" (including
variants thereof). This consideration, of course, was quite
appropriate, because the short-term obligation rules apply to
acquisition discount or original issue discount, depending on the
type of obligation involved.
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