Levelland Savings and Loan Assoc. v. United States

GODBOLD, Circuit Judge:

The taxpayer is a Texas state-chartered building and loan association. It adopted for federal income tax purposes the reserve method of accounting for bad debts. During each of the taxable years 1961, 1962 and 1963 the association included in the amount claimed as a deduction for addition to its bad debt reserve a sum which it had transferred to its “nonwithdrawable capital stock account.” Each year the transfer to this stock account was in addition to amounts transferred to the bad debt reserve account.

The “nonwithdrawahle capital stock account” was maintained under…