- 15 - In Rev. Rul. 55-437, supra, a building and loan association became subject to Federal income taxation on January 1, 1952, having been previously tax exempt. For its first taxable year, beginning after December 31, 1951, the association adopted the accrual method of accounting. As of January 1, 1952, the association had outstanding balances of installment accounts receivable of 500x dollars of which 200x dollars represented unrealized profit with respect to such contracts. Rev. Rul. 55- 437, 1955-2 C.B. at 549-551, states: the only election of accounting method binding upon the association is that made in the return filed by it for its first taxable year beginning after December 31, 1951. * * * Accordingly, if the association selects the accrual method of accounting in the return for its first taxable year beginning after December 31, 1951, the 200x dollars of unrealized profit received in such and subsequent taxable years under the installment contracts which were entered into in taxable years beginning prior to January 1, 1952, would not constitute taxable income insofar as the right to receive such installment payments accrued during a taxable year in which the association was exempt from Federal income taxation. However, if the taxpayer selects the cash or installment method of accounting in such return, the payments received, to the extent of the previously unrealized profits included therein, would constitute taxable income in the year received. Rev. Rul. 55-437, supra, does not support petitioner’s position with respect to its pre-1985 interest accruals. Rev. Rul. 55-437, supra, deals with the timing of income recognition. The revenue ruling has nothing to do with the determination of basis for purposes of a foreclosure-related bad debt deductionPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Next
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