Hospital Corporation of America and Subsidiaries - Page 20

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          the current year and the actual number of preceding taxable                 
          years.  The taxpayer may use a predecessor's experience from                
          preceding taxable years.  Sec. 1.448-2T(e)(2)(iii), Temporary               
          Income Tax Regs., 52 Fed. Reg. 22775 (June 16, 1987).                       
               The separate receivable system provides for the                        
          determination of the Uncollectible Amount only once for each                
          account receivable, regardless of the term of that receivable.              
          Sec. 1.448-2T(e)(3), Temporary Income Tax Regs., supra.  As each            
          receivable is collected, income is reported only to the extent              
          not previously accrued.  If a receivable is not collected, the              
          bad debt deduction is limited to the amount previously reported             
          as income.  Id.                                                             
               The Periodic System of the Nonaccrual-Experience Method                
               Alternatively, a taxpayer may elect the so-called periodic             
          system for applying the nonaccrual-experience method.  Notice 88-           
          51, 1988-1 C.B. 535; see H. Rept. 99-426, at 608 (1985), 1986-3             
          C.B. (Vol. 2) 1, 608.  The periodic system requires a taxpayer to           
          establish an account which represents the aggregate amount of               
          accounts receivable in a trade or business eligible for the                 
          nonaccrual-experience method that the taxpayer estimates will not           
          be collected, based on the 6-year moving average formula set                
          forth in section 1.448-2T(e)(2)(i), Temporary Income Tax Regs.,             
          supra, and Notice 88-51, 1988-1 C.B. at 536.  At yearend, the               
          taxpayer adjusts the account to reflect the aggregate amount that           
          the taxpayer estimates will not be collected on the accounts                




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