United States v. Bank of America Trust and Savings Association, a National Banking Association

This appeal involves federal excess profits taxes for the years 1950, 1952 and 1953 in the aggregate amount of $1,510,803.54. Deficiencies aggregating this sum were assessed and paid. Timely claims for refunds were filed and were rejected. The taxpayer then brought this action for recovery of the taxes paid. The district court granted judgment for plaintiff, the exact amount of recovery being computed by the Internal Revenue Service pursuant to the stipulation of the parties. The United States appeals.

Taxpayer is a national bank which used the reserve method of accounting for bad debts during the taxable years in question. Section 433(a) (1) (L) of the Internal Revenue Code of 1939, 26 U.S.C.A. Excess Profits Taxes, § 433(a) (1) (L) relating to the computation of excess profits net income, provides that in the case of such a bank using the reserve method of accounting for bad debts, there shall be allowed, in lieu of the amount allowable under the reserve method for bad debts, a deduction for debts which became worthless within the taxable year, in whole or in part, within the meaning of section 23 (k) of the Internal Revenue Code of 1939, 26 U.S.C.A. § 23 (k).

Giving effect to…