SECTION 3. SCOPE

.01 In general . Section 11.01 of the APPENDIX of Rev. Proc. 2002–9 provides rules for a bank (as defined in § 581, including a bank for which a qualified sub

chapter S subsidiary (QSub) election is filed) that wants to change its method of accounting for bad debts from the § 585 reserve method to the § 166 specific chargeoff method. Section 11.01 specifically references the requirement that a bank must change its method of accounting for bad debts from the § 585 reserve method in order to be eligible to elect subchapter S status.

.02 Election for § 481(a) adjustment . Section 4.01 of this revenue procedure describes the process by which a bank may elect under § 1361(g) to take into account the § 481(a) adjustment resulting from a change in method of accounting for bad debts in determining taxable income for the taxable year immediately preceding the year of change.