Peoples Bank & Trust Co. v. Commissioner
United States Tax Court
Pursuant to its longstanding and generally accepted accrual method of accounting, Peoples Bank deducted as an interest expense the balance of a reserve existing at the end of each year in issue which reflected the estimated portion of actual interest credits to be made to savings accounts on May 1 of the following year which were allocable to the months of November and December of the taxable year.
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Pursuant to its longstanding and generally accepted accrual method of accounting, Peoples Bank deducted as an interest expense the balance of a reserve existing at the end of each year in issue which reflected the estimated portion of actual interest credits to be made to savings accounts on May 1 of the following year which were allocable to the months of November and December of the taxable year. Held, since there existed no fixed and certain interest liability on the savings deposits as of Dec. 31, no interest expense was properly accruable at that time. Held, further, respondent initiated…
1Opinion of the Court
DawsoN, Judge:
Respondent determined the following income tax deficiencies against the petitioner:
Year Deficiency
1962 _$10,856.96
1963 _ 2,476.99
1964 _ 3,788.80
By amended answer respondent claims additional deficiencies of $169.55 for 1962 and $100 for 1964. Certain adjustments have not been placed in controversy by petitioner. The principal issue for decision is whether petitioner is entitled to interest expense deductions for amounts which, under its regular and longstanding method of accounting, were accrued as expenses in the months of November and December of each of the years in issue. If…
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