Merchants Industrial Bank, a Corporation Organized and Existing Under the Laws of the State of Colorado v. Commissioner of Internal Revenue

BREITENSTEIN, Circuit Judge.

In this appeal from the Tax Court, the petitioner-appellant Merchants Industrial Bank contends that the Commissioner of Internal Revenue improperly disallowed portions of the taxpayer’s additions to a reserve for bad debts in each of the years 1965, 1966, and 1967. The Tax Court sustained the Commissioner. T.C.Memo. 1972-18.

Taxpayer is a bank which makes high-risk loans to persons whose credit does not qualify them for loans from the usual commercial banks. Because of the risk, it charges an average of 20% simple interest per annum. Loans are made for periods of…