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In that opinion, we held that petitioner was required to take net
operating losses into account in computing additions to its bad
debt reserve under the percentage of taxable income method set
forth in section 593(b)(2)(A).1 In so doing, we upheld such
requirement as provided in section 1.593-6A(b)(5)(vi) and (vii),
Income Tax Regs.
Respondent's computation is based upon the use of the
percentage of taxable income method. Petitioner's computation
for some of the years involved is based upon the use of the
experience method, an alternative method permitted by section
593(b)(4). Respondent objects to petitioner's use of the
experience method on the ground that it raises a new issue not
permitted under the principles governing the operation of Rule
155. We agree with respondent.
The prior proceeding herein involved a motion for summary
judgment by each party. Both motions clearly stated that the
only issue remaining in the case was whether net operating losses
should be taken into account in determining petitioner's taxable
income for the purpose of utilizing the percentage of taxable
income method. At no time, either in its pleadings, motion
papers, or briefs, did petitioner assert that the experience
method might produce a more favorable result than the percentage
1 All statutory references are to the Internal Revenue Code
in effect for the years in issue, and all Rule references are to
the Tax Court Rules of Practice and Procedure.
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Last modified: May 25, 2011