- 18 -
22775 (June 16, 1987). No other method or formula may be used to
10 (...continued)
year period (i.e., the total amount of sales resulting
in accounts receivable) throughout the period.
Accounts receivable described in paragraphs (c) [any
amounts due for which interest or penalties are
charged] and (d) [any amounts not earned by the
taxpayer for services performed by the taxpayer] of
this section are not taken into account in computing
the ratio.
(ii) Period of less than six years. A period
shorter than six years generally will be appropriate
only if there is a change in the type of a substantial
portion of the outstanding accounts receivable such
that the risk of loss is substantially increased. * * *
* * * * * * *
(3) Mechanics of nonaccrual-experience method.
The nonaccrual-experience method shall be applied with
respect to each account receivable of the taxpayer
which is eligible for such method. With respect to a
particular account receivable, the taxpayer will
determine, in the manner prescribed in paragraph (e) of
this section, the amount of such account receivable
that is not expected to be collected. Such
determination shall be made only once with respect to
each account receivable, regardless of the term of such
receivable. The estimated uncollectible amount shall
not be recognized as gross income. Thus, the amount
recognized as gross income shall be the amount that
would otherwise be recognized as gross income with
respect to the account receivable, less the amount
which is not expected to be collected. Upon the
collection of the account receivable, additional gross
income shall be recognized with respect to the
collection of any amount not initially expected to be
collected. Similarly, no bad debt deduction under
section 166 for a wholly or partially worthless account
receivable shall be allowed for any amount not
previously taken into income under the nonaccrual-
experience method. [Sec. 1.448-2T(e), Temporary Income
Tax Regs., 52 Fed. Reg. 22774-22775 (June 16, 1987), as
amended by T.D. 8194, 1988-1 C.B. 186.]
Page: Previous 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 NextLast modified: May 25, 2011