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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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