SECTION 5. PROPORTIONAL

METHOD OF ACCOUNTING

This section 5 describes the proportional method of accounting for OID on a pool of credit card receivables. Under the method—

.01 The required computations must be made monthly. Thus, the computation pe

2011–50 I.R.B. 848 December 12, 2011

M_OID = BEG_OID * (SRPM_P / BEG_SRPM), where M_OID = Monthly OID; BEG_OID = Beginning OID; SRPM_P = SRPM Payments; BEG_SRPM = Beginning SRPM.

.06 For purposes of determining the Beginning SRPM and Beginning OID for a period, the taxpayer should take into account the following items:

(1) The charges and fees relating to the pool for the preceding period that are properly treated as OID;

(2) Credit card accounts transferred into the pool from another one of the taxpayer’s pools during the preceding period, including any unaccrued OID attributable to the accounts;

(3) Credit card accounts transferred out of the pool into another one of the taxpayer’s pools during the preceding period, including any unaccrued OID attributable to the accounts; and

(4) Credit card accounts written off during the preceding period, including any unaccrued OID attributable to the accounts.

.07 Section 1.6001–1(a) of the Procedure and Administration Regulations provides that any person subject to tax under subtitle A of the Internal Revenue Code shall keep such permanent books of account or records to establish the amount of gross income, deductions, credits, or other matters required to be shown by such person in any return of such tax. In order to satisfy the recordkeeping requirements of § 6001 and the regulations thereunder, a taxpayer that uses the proportional method of accounting should maintain records supporting all aspects of its method, including, but not limited to, the computations described in section 5 of this revenue procedure.