111 T.C. No. 8
UNITED STATES TAX COURT
SECURITY STATE BANK, Petitioner v. COMMISSIONER OF INTERNAL
REVENUE, Respondent
Docket No. 15478-96. Filed September 3, 1998.
P is a bank that uses the cash method of
accounting. During 1989, P made short-term loans to
customers. The principal and interest on the loans
were payable at maturity. R determined that P must
accrue interest and/or original issue discount on the
loans pursuant to sec. 1281(a)(1) and (2), I.R.C.
Held: Sec. 1281(a)(2), I.R.C., does not require a
bank to accrue interest on short-term loans made in the
ordinary course of its business. Security Bank Minn.
v. Commissioner, 98 T.C. 33 (1992), affd. 994 F.2d 432
(8th Cir. 1993).
Held, further: Sec. 1281(a)(1), I.R.C., does not
require a bank to accrue original issue discount on
short-term loans made in the ordinary course of
business.
Martin J. Peck, for petitioner.
Charles M. Berlau, for respondent.
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