Rev. Rul. 57-482

In accordance with a plan of complete liquidation adopted after June 22, 1954, a corporation sold its assets, including accounts receivable at face value, in a transaction on which no gain or loss is recognized to the corporation under section 337 of the Internal Revenue Code of 1954. However, there remained, on the books of the corporation, a reserve for bad debts which had at all times been reasonable and necessary and which had been accumulated by additions for which the taxpayer derived full tax benefits in prior taxable years. Held, the reserve for bad debts constitutes ordinary income to the corporation in its final Federal income tax return, since the need for maintaining the reserve ceased when the taxpayer disposed of the accounts receivable. See Geyer, Cornell & Newell, Inc. v. Commissioner, 6 T. C. 96, acquiescence, C. B. 1946-1, 2. The fact that no gain or loss on the sale of the assets was recognized to the corporation pursuant to section 337 of the Code does not have any bearing upon the realization of income by the corporation when the need for maintaining the reserve for bad debts ceased.