Asset method question: phase-in

[Guest guppy]

Asset method is 5-year phase-in of gains and losses on market value described in Rev. Proc. 2000-40 Section 3, Approval 15.

Question is: what is the correct treatment of receivable contributions for the prior year (made during the year) for calculating the expected value of the assets at year-end:

1) Give them a full year's interest

2) Weight the interest depending on the timing

Ex.

1/1/03 MV = 100

2002 contribution made 7/1/03 = 10

Interest is 8%

What is the expected value of assets when we go to determine the gain/loss to smooth in to calculate our 1/1/04 AVA?

1) 110 * 1.08

2) 100*1.08 + 10*1.04

[david rigby]

Possibly this is "fine-tuning" permitted under the method. IMHO, choosing either will not violate Approval 15 or the Rev. Proc., as long as you document it and apply consistently.

However, in my experience, option (1) is what I have done and seen. Can't think of a single real occurrence of (2).

[Blinky the 3-eyed Fish]

I agree with everything Pax said.