Arcadia Savings & Loan Ass'n v. Commissioner

The Tax Court of the United States rendered its decision redetermining deficiencies in income tax against petitioner Arcadia Savings and Loan Association (hereinafter referred to as “Arcadia”) for the years 1954 and 1955 in the respective amounts of $8,385.57 and $111,327.62, and its decisions fixing the amounts of the liabilities of the remaining individual petitioners as transferees of Arcadia, the parties having stipulated that the transferees were liable as such for any unpaid taxes due and owing by Arcadia.

A joint petition for review of the decisions of the Tax Court was timely filed. The opinion of the Tax Court is reported at 34 T.C. 679 . This Court has jurisdiction under Title 26 U.S.C. § 7482 .

The basic question for decision is whether amounts deducted from gross income by Arcadia in 1952 and added to bad debts reserve and Federal Insurance reserve, pursuant to Sec. 23 of the Internal Revenue Code of 1939, as amended, 26 U.S.C. § 23 , for the purpose of computing taxable net income for that year, should be returned to income in 1954 and 1955 following Arcadia’s sale of its loans receivable and other assets as of January 2, 1953.

The case was presented to the Tax…