- 3 -
of taxable income method, if its position that net operating
losses should not be taken into account in computing taxable
income should be rejected, and therefore provide the basis for
applying the limitation on the addition to the bad debt reserve
under section 593(b)(1)(B).2
Clearly, the utilization of the experience method raises a
new issue and one which would require the reopening of the record
and the taking of additional evidence. Raising such an issue
clearly is not permissible in a Rule 155 proceeding.
Chilingirian v. Commissioner, 918 F.2d 1251, 1255 (6th Cir.
1990), affg. T.C. Memo. 1986-463; Cloes v. Commissioner, 79 T.C.
933 (1982) (taxpayer not permitted to use income averaging,
raised for the first time in the Rule 155 computation, after
losing the issue of includability of an item in income).3
Petitioner attempts to avoid the impact of the foregoing
circumstances by two assertions. First, it asserts that the
determination of which of the two methods applies is mechanical
and therefore is permitted in a Rule 155 proceeding citing Home
Group, Inc. v. Commissioner, 91 T.C. 265, 268-271 (1988), affd.
on another issue 875 F.2d 377 (2d Cir. 1989). In making this
2 Sec. 593(b)(1)(B) provides that the addition to the bad
debt reserve shall not exceed the larger of the amount produced
by the percentage of taxable income and experience methods.
3 See also Vest v. Commissioner, T.C. Memo. 1995-188;
Estate of Street v. Commissioner, T.C. Memo. 1994-568, and cases
discussed therein.
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