- 29 -
taxpayer, and whose denominator is the total of such
amounts billed within the same five year period. If
the taxpayer has not been in existence for the prior
five taxable years, the portion of such five year
period which the taxpayer has been in existence is to
be used.
For example, assume that an accrual-basis taxpayer
has $100,000 of receivables that have been created
during the most recent five taxable years. Of the
$100,000 of accounts receivable, $1,000 have been
determined to be uncollectible. The amount, based on
experience, which is not expected to be collected is
equal to 1 percent ($1,000 divided by $100,000) of any
receivable arising from the provision of services that
are outstanding at close of the taxable year. [Emphasis
added; fn. ref. omitted.]
As the foregoing emphasized language reveals, one paragraph
of the committee report specifies that the Uncollectible Amount
is calculated by multiplying the total amount billed during the
taxable year by the ratio of the sum of the amount of those
billings determined uncollectible within the most recent 5
taxable years to the sum of the billings within that same 5-year
period. In the example in the following paragraph, however, the
formula is expressed somewhat differently; to wit, in the
example, the Uncollectible Amount is calculated by multiplying
the receivables outstanding at the close of the taxable year by
the ratio of the amount of those billings determined
uncollectible within the most recent 5 taxable years to the sum
of the billings within that same 5-year period. In our view, the
committee report merely suggests that Congress intended eligible
taxpayers to employ a method to determine statistically the
Page: Previous 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 NextLast modified: May 25, 2011