We learned in Bad Debt 1 HW that accrual-basis taxpayers cannot use the allowance method to estimate bad debt. The IRS allows a special method that does not officially use the allowance method, but the effect is the same as if they used the allowance method. Hint: review the expanded solutions for chapter 3.

1. What is the name of this method?

2. What kind of businesses may or may not use this method?

3. In what way is this method similar to the allowance method and in what way is it technically different?