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OPINION
RUWE, Judge: Respondent determined a deficiency of
$29,972.41 in petitioner's 1989 Federal corporate income tax.
The issue for decision is whether section 1281(a)1 requires
petitioner, a cash basis taxpayer, to accrue interest and/or
original issue discount earned on short-term loans.
Background
The parties submitted this case fully stipulated. The
stipulation of facts and supplemental stipulation of facts are
incorporated herein by this reference. Petitioner is a
corporation whose principal place of business was in Wellington,
Kansas, at the time it filed the petition.
Petitioner is a commercial bank that makes a variety of
loans in the ordinary course of its business. These loans are of
varying duration, including loans of less than 1 year, loans of 1
year, and loans of more than 1 year. Petitioner had, and still
has, business reasons for using notes with a term of 1 year or
less.
During 1989, petitioner made some loans that were
documented by promissory notes with a stated maturity date that
was 1 year from the date the notes were issued. Such loans will
1Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year in issue.
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Last modified: May 25, 2011