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however, specifies that "the Secretary of the Treasury may
provide a periodic system of accounting for billings that, on the
basis of experience, will not be collected where the periodic
system results in the same taxable income as would be the case
were each receivable recorded separately." In Notice 88-51,
1988-1 C.B. 535, the Commissioner published the periodic system
as an alternative to the separate receivable system under section
1.448-2T(e)(3), Temporary Income Tax Regs., 53 Fed. Reg. 12513-
12514 (Apr. 15, 1988).
Petitioners assert that the periodic system provided by the
Commissioner uses an inappropriate formula to estimate the
portion of yearend accounts receivable that a taxpayer will not
collect. Petitioners argue that, to prevent an incorrect result,
a formula applied to yearend accounts receivable balances must be
based on the relationship of writeoffs to yearend accounts
receivable balances, not the relationship of writeoffs to annual
charges. Accordingly, petitioners' challenge to the periodic
system is premised on their contention that the Amended Formula,
on which the periodic system is based, is invalid. We already
have concluded that the Amended Formula is a permissible
construction of section 448(d)(5). Accordingly, we conclude that
the periodic system of the nonaccrual-experience method is
reasonable and, therefore, valid.
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