Page:United States Statutes at Large Volume 76.djvu/1027

 76 STAT. ]

PUBLIC LAW 87-834-OCT. 16, 1962

For purposes of subparagraph (B), a taxpayer is a new company for any taxable year only if such taxable year begins not more than 10 years after the first day on which it (or any predecessor) was authorized to do business as an organization described in subsection (a). "(4) EXPERIENCE METHOD.—The amount determined under this paragraph for the taxable year shall be an amount equal to the amount determined under section 166(c) (without regard to this subsection) to be a reasonable addition to the reserve for losses on qualifying real property loans. '•(5)

If the percentage exceeds—

"(c)

26 USC lee.

LIMITATION IN CASE OF CERTAIN DOMESTIC BIHLDINO AKD

LOAN ASSOCIATIONS.—If the percentage of the assets of a domestic building and loan association which are not assets described in section 7701(a) (19)(D) (ii) exceeds 36 percent for the taxable year (as determined for purposes of section 7701(a) (19) for such year), the amount determined under paragraph (2), and the amount determined under paragraph (3), shall in each case be the amount (detemiined without regard to this paragraph but with regard to the limits contained in paragraphs (2), (3), and (1)(B)) reduced by the amount determined under the following table:

36 percent 37 percent 38 percent 39 percent 40 perceht

979

but does not exceed— .H7 percent 38 percent 39 percent 40 percent 41 percent

the reduction shall be the following proportion of the amount so determined without regard to this paragraph— 1/12 1/6 1/4 1/3 5/12

TREATMENT OF RESERVES FOR BAD DEBTS.—

"(1) ESTABLISHMENT OF RESERVES.—Each taxpayer described

in subsection (a) which uses the reserve method of accounting for bad debts shall establish and maintain a reserve for losses on qualifying real property loans, a reserve for losses on nonqualifying loans, and a supplemental reserve for losses on loans. For purposes of this title, such reserves shall be treated as reserves for bad debts, but no deduction shall be allowed for any addition to the supplemental reserve for losses on loans. "(2) ALLOCATION OF PRE-I9 63 RESERVES.—For purposes of this section, the pre-1963 reserves shall, as of the close of December 31, 1962, be allocated to, and constitute the opening balance of— " (A) the reserve for losses on nonqualifying loans, " (B) the reserve for losses on qualifying real property loans, and " (C) the supplemental reserve for losses on loans. "(3) METHOD OF ALIXX:ATION.—The allocation provided by paragraph (2) shall be made— " (A) first, to the reserve described in paragraph (2)(A), to the extent such reserve is not increased above the amount which would be a reasonable addition under section 166(c) for a period in which the nonqualifying loans increased from zero to the amount thereof outstanding at the close of December 31, 1962; " (B) second, to the reserve described in paragraph (2)(B), to the extent such reserve is not increased above the amount which would be determined under paragraph (3)(A) or (4) of subsection (b) (whichever such amount is the larger) for a period in which the qualifying real property loans increased

Post, p. 983. Post, p. 982.

�