Home Savings and Loan Association v. United States

In March of 1957, Plaintiff Home Savings and Loan Association, transferee (hereinafter referred to as “Home”) through its attorney and agent, Thomas C. Webster, purchased all of the outstanding guarantee stock of Hollywood Savings and Loan Association (hereinafter referred to as “Hollywpod”). Thereafter, on April 19, 1957, Hollywood merged into Home. The corporate existence of Hollywood terminated but its entire business was continued without interruption as an integral part of plaintiff association, Horae.

All procedural requirements have been complied with by Plaintiff. This Court has jurisdiction by virtue of 28 U.S.C. §§ 1346 (a)(1) and 1402(a)(1), and 26 U.S.C. § 7422 . The income tax, if any, is that of Hollywood, but Home would be liable as transferee and has paid such tax as transferee.

One primary issue and several secondary issues are presented by the pleadings, but a decision on the primary issue disposes of the ease in its entirety.

The primary issue is: In a merger, does the reserve for bad debts of the merged corporation become accelerated into' income as a result of the merger? Specifically here, should the pre-merger reserve for bad debts of Hollywood as of…