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business was based on our interpretation of section 1281 as
originally enacted in 1984. As originally enacted, section
1281(a) applied only to acquisition discount or original issue
discount. Deficit Reduction Act of 1984, Pub. L. 98-369, sec.
41, 98 Stat. 548. Section 1281 was amended in 1986 to add the
provisions of section 1281(a)(2). Tax Reform Act of 1986, Pub.
L. 99-514, sec. 1803, 100 Stat. 2791. In Security Bank Minn., we
first analyzed section 1281 in its original form. On the basis
of that analysis, we stated:
We conclude that the legislative history supports
petitioner's interpretation of section 1281, i.e., that
it was enacted in 1984 to deal with problems associated
with purchased debt instruments involving a discount
and not with loans made by a bank in the ordinary
course of its business. Accordingly, we hold that the
loans here in dispute are not the sort of obligations
or instruments to which section 1281 applied as enacted
in 1984. [Security Bank Minn. v. Commissioner, supra
at 42.]
We then concluded that the addition of section 1281(a)(2) in 1986
was not intended to cover loans made by banks.
We do not believe that the 1986 amendment, which
originated as a technical correction, was intended to
increase the coverage of section 1281(a) to loans made
if, as we have concluded, such loans were not covered
by the 1984 Act. The amendment, in our view, was
intended to express the amounts to be taken into
current income and not to expand the category of
instruments covered by section 1281(a). [Id. at 43.]
Our analysis in Security Bank Minn. v. Commissioner, supra,
makes clear that we have interpreted section 1281 as having no
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