Internal Revenue Service
Revenue Ruling

TaxLinks.com   sm

 Rev. Rul. 70-78

1970-1 C.B. 120

IRS Headnote

A calendar year accrual basis corporation may not deduct an addition to its reserves in anticipation of the allowance of cash discounts on outstanding accounts receivable at the end of its accounting period; G.C.M. 1342 superseded.

Full Text

Rev. Rul. 70-78 /1/

A calendar year corporation that uses an accrual method of accounting may not deduct an addition to its reserve for customers' cash discounts, based on its customers' outstanding accounts receivable at the end of its accounting period, in anticipation of the allowance of cash discounts on those accounts in the following year.

G.C.M. 1342, C.B. VI-1, 177 (1927), is superseded since the position stated therein is restated under the current statute and regulations in this Revenue Ruling.

/1/ Prepared pursuant to Rev. Proc. 67-6, C.B. 1967-1, 576.