A qualifying reserve still had to be available for bad debts. In Colorado County Federal Savings Loan Association, 36 T.C. 1167 (1961), affd. 309 F.2d 751 (5th Cir. 1962), the taxpayer failed to make any transfers to reserves on its books of account until 1 1/2 or 2 1/2 years after the close of the year. No issue was raised as to the qualifying character of the reserve accounts to which the transfers were ultimately made, but we held that the transfers came too late and failed to comply with the strictures of section 1.593-1 of the regulations that "the establishment of such reserve and all adjustments made thereto must be reflected on the regular books of account of the institution at the close of the taxable year or as soon as practicable thereafter."

A qualifying reserve still had to be available for bad debts. In Colorado County Federal Savings & Loan Association, 36 T.C. 1167 (1961), affd. 309 F.2d 751 (5th Cir. 1962), the taxpayer failed to make any transfers to reserves on its books of account until 1 1/2 or 2 1/2 years after the close of the year. No issue was raised as to the qualifying character of the reserve accounts to which the transfers were ultimately made, but we held that the transfers came too late and failed to comply with the strictures of section 1.593-1 of the regulations that ‘the establishment of such reserve and all adjustments made thereto must be reflected on the regular books of account of the institution at the close of the taxable year or as soon as practicable thereafter.’

There was, however, no such action in this case: the taxpayer made its allocation at the time it filed its income tax return as evidenced by its tax return with its schedules.         In Colorado County Federal Savings & Loan Ass'n v. Commissioner (1961) 36 T.C. 1167-- another case involving the application of Section 593-- the taxpayer on its income taxes took a deduction under the title 'Tax Reserve for contingencies' for the years 1954 and 1955. Such deduction was 'not reflected on petitioner's general books of account' as reserves but as 'a part of the petitioner's surplus and undivided profits', (at pp.1170-1171, 36 T.C.) and thus available for dividends.

We did not give full citations in this paragraph because these citations were set forth in our previous discussion. These citations are as follows: Levelland Savings & Loan Association v. United States, 421 F.2d 243 (5th Cir. 1970); Leesburg Federal Savings & Loan Association v. Commissioner, 55 T.C. 378 (1970); Commercial Savings & Loan Association v. Commissioner, 53 T.C. 14 (1969); Colorado County Federal Savings & Loan Association v. Commissioner, 36 T.C. 1167 (1961), affd. 309 F.2d 751 (5th Cir. 1962); Rio Grande Building & Loan Association v. Commissioner, 36 T.C. 657 (1961); Security Federal Savings & Loan Association v. United States, 346 F. Supp. 908 (M.D. Fla. 1972); Newport Federal Savings & Loan Association v. United States, 259 F. Supp. 82 (E.D. Ark. 1966).] In Centralia, the taxpayers, both savings and loan associations, elected the reserve method for bad debts and computed their annual additions to reserves under the percentage of taxable income method.

We did not give full citations in this paragraph because these citations were set forth in our previous discussion. These citations are as follows: Levelland Savings Loan Association v. United States, 421 F.2d 243 (5th Cir. 1970); Leesburg Federal Savings LoanAssociation v. Commissioner, 55 T.C. 378 (1970); Commercial Savings Loan Association v. Commissioner, 53 T.C. 14 (1969); Colorado County Federal Savings Loan Association v. Commissioner, 36 T.C. 1167 (1961), affd. 309 F.2d 751 (5th Cir. 1962); Rio Grande Building Loan Association v. Commissioner, 36 T.C. 657 (1961); Security Federal Savings Loan Association v. United States, 346 F. Supp. 908 (M.D. Fla. 1972); Newport Federal Savings Loan Association v. United States, 259 F. Supp. 82 (E.D. Ark. 1966).]

Indeed, failure to make timely additions to the reserves has been regarded as fatal, regardless of whether deductions would otherwise have been permissible. Cf. Commercial Savings & Loan Association, 53 T.C. 14; Rio Grande Building & Loan Association, 36 T.C. 657; Colorado County Federal Savings & Loan Association, 36 T.C. 1167, affirmed per curiam 309 F.2d 751 (C.A.5). Petitioner does not here raise the issue presented in Leesburg whether the mere filing of income tax returns claiming the deduction for additions to the reserve and retention of copies thereof are sufficient to satisfy the accounting requirements of the statute and regulations.

We think copies of tax returns, even with supplemental material, do not meet these requirements. We have so held in Colorado County Federal Savings & Loan Association, 36 T.C. 1167, affirmed per curiam 309 F.2d 751 (C.A. 5). The description of the deduction for additions to bad debt reserves as a ‘privilege’ apparently has grown out of the history of the tax status of domestic building and loan associations.

It has been stated that the time limit for making entries to reserve accounts generally should be not later than the time at which the taxpayer filed its income tax return for the year involved. Rio Grande Building & Loan Association, supra at 664; Colorado County Federal Savings & Loan Assn., 36 T.C. 1167 (1961), affd. 309 F.2d 751 (C.A. 5, 1962). Where the Congress has authorized certain tax privileges and has prescribed the conditions to be met in qualifying for them it has been held that strict compliance with the statute is necessary, for example: corporations seeking treatment as small business corporation, William Pestcoe, 40 T.C. 195 (1963); J. W. Frentz, 44 T.C. 485 (1965), affd. 375 F.2d 662 (C.A. 6, 1967); Thomas E. Bone, 52 T.C. 913 (1969); deductions claimed for depletion, Riley Co. v. Commissioner, 311 U.S. 55 (1940); election to capitalize or expense intangible drilling costs, Boone County Coal Corporation v. United States, 121 F.2d 988 (C.A. 4, 1941); valuation for capital stock tax purposes, Scaife Co. v. Commissioner, 314 U.S. 459 (1941).