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Pinellas County (Pinellas). Thereafter, Pinellas became a
subsidiary of Barnett and a member of its consolidated group for
Federal income tax purposes.
Pinellas’s board of directors consisted of the current
directors of Barnett Bank of Pinellas County, N.A., and Home
Federal. In addition, Alfred T. May, the president and chief
executive officer of Home Federal, served as the president and
chief operating officer of Pinellas. Pinellas also continued to
use all employees in the combined organization.
Pinellas’s deposits were insured by the FDIC and, after
FIRREA, by the BIF.
Bad Debt Reserve Method of Accounting
After their acquisitions by Barnett, Southwest and Pinellas
were members of Barnett's consolidated group for Federal income
tax purposes. Barnett timely filed (pursuant to extensions) a
Form 1120, U.S. Corporation Income Tax Return, for each of its
taxable years 1986 through 1994. For all relevant years,
petitioner used a fiscal year ended December 31.
For each of the taxable years in issue, Barnett took the
position that Southwest and Pinellas qualified as "domestic
building and loan associations" within the meaning of section
7701(a)(19); as a result, Barnett claimed a deduction for
Southwest’s and Pinellas’s bad debts based on the reserve method
of accounting under former section 593. Barnett attached the
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