Constantly Arcadia is a person in the latest Federal Home Mortgage Financial and you will Government Savings and you may Mortgage Insurance coverage Company

Louis F. Oberdorfer, Asst. Atty. Gen., Lee Good. Jackson, Harry Baum, Fred E. Youngman and you can Morton Rothschild, Attys., Dept. away from Justice, Washington, D. C., to possess respondent.

New Tax Court of your All of us rendered its choice redetermining deficiencies in taxation against petitioner Arcadia Offers and you will Loan Relationship (hereinafter named “Arcadia”) to the decades 1954 and you may 1955 on respective levels of $8, and you will $111,, and its ounts of your liabilities of leftover individual petitioners since transferees regarding Arcadia, the new events that have stipulated that transferees was responsible therefore for your delinquent taxation owed and you can due by the Arcadia.

A mutual petition to have summary of the fresh decisions of Income tax Judge is punctual registered. This new opinion of the Taxation Legal is claimed within 34 T.C. 679. Which Court has legislation less than Label twenty-six You.S.C. § 7482.

Arcadia try organized during the 1927 given that a hope inventory association pursuant on the guidelines of the State away from Ca, issuing 250 offers out of guarantee stock, and you may thereafter carried on a discount and financing business, from the typical and typical manner, until the dissolution on the December 30, 1955

The basic matter having ounts subtracted from revenues by the Arcadia inside the 1952 and you may added to bad debts reserve and Government Insurance coverage set aside, pursuant so you can Sec. 23 of Interior Revenue Password off 1939, because the revised, 26 You.S.C. § 23, for the true purpose of measuring taxable net gain for this 12 months, will be gone back to money in the 1954 and you will 1955 adopting the Arcadia’s purchases of the finance receivable or other assets at the time of January 2, 1953.

Your situation try presented to new Income tax Courtroom toward a good stipulation of circumstances formulated from the documentary showcases. The fresh salient circumstances taken from the stipulation was:

Arcadia, since a discount and you may financing connection, is excused out of Federal income tax around Sec

101(4) of your Inner Funds Code regarding 1939, 26 You.S.C. § 101 (4) up until one area was altered by Sec. 313(e) of Money Work away from 1951, c. 521, 65 Stat. 452, removing particularly difference since December 30, 1951. Arcadia had collected, within the years it absolutely was excused off income tax, reserves on amount of $167,. The net money away from Arcadia to the nonexempt season 1952 was $259,. Arcadia is actually named, lower than Sec. 23(k) (1) of your own Inner Cash Code out-of 1939, since revised, to help you subtract from the gross income having 1952 once the a reserve to possess bad debts, extent comparable to new cheaper of the net income for you to definitely seasons ($259,), or even the amount ($275,) whereby 12 each centum of their full dumps or withdrawable membership during the personal of such season surpassed the sum its surplus, undivided payouts, and supplies since January step one, 1952, the start of its nonexempt year. Appropriately, Arcadia credited $18, of its net gain for 1952 so you can its financing reserve and you can Federal Insurance policies set aside membership, and you may paid the bill of the net income having 1952, or $241,, to help you the reserve to possess money owed membership and you can stated no nonexempt income on the taxable year ended December 31, 1952.

At the end of 1952, Arcadia’s total supplies amounted so you’re able to $427, including told you figures out of $167, and you can $259,. Arcadia generated not any longer additions so you’re able to the supplies getting money owed. After 1952, brand new put aside membership were found getting accounting aim all the time while the funding accounts into Arcadia’s books, plus the capital or websites well worth section of Arcadia’s harmony sheet sets in the way equally required by various Ca and you may Government organizations.

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