A recent case that ostensibly dealt with a bank's deductions for interest and other expenses associated with tax-exempt income could affect how advisers approach interpretation of the Code and revenue rulings generally.

PSB Holdings is the parent of an affiliated group that includes Peoples State Bank, which is based in Wausau, Wis. It also includes Peoples' wholly owned subsidiary, PSB Investments Inc., which handles investment of the bank's stock and bond portfolio. Code section 265(b) requires financial institutions to allocate a pro rata portion of their interest expense to the average adjusted bases of their tax-exempt obligations acquired after Aug. 7, 1986. In ...