It's Time for Schlude to Go

17 Pages Posted: 27 Sep 2001 Last revised: 12 Jul 2010

See all articles by Steven J. Willis

Steven J. Willis

University of Florida Levin College of Law


In this report, Willis argues that tax law should pay more, not less, deference to accounting principles. This contrasts with opinion offered in an earlier Tax Notes article. He demonstrates that accrual method taxpayers subject to the Schlude requirement of income recognition on receipt suffer: They effectively pay higher taxes than are economically justified. He suggests that the same analysis holds for accrual taxpayers affected by section 461(h), dealing with the economic performance requirement for deductions. While careful planning can reduce these adverse impacts, the author suggests a change in law. One approach, deferral accounting, would solve much of the problem, although not all of it. Ideally, according to Willis, accrual taxpayers should be taxed on the economic substance of the transaction, which involves both deferral accounting plus application of time value of money principles, particularly those dealing with discount loans. But both approaches, he concludes, are far preferable to current law which distinguishes between taxpayers who borrow from their customers as opposed to those who seek capital elsewhere. This artificial distinction, argues Willis, is poor tax policy and results in unnecessary economic distortions.

Suggested Citation

Willis, Steven J., It's Time for Schlude to Go. Tax Notes, Vol. 93, No. 1, October 1, 2001, Available at SSRN:

Steven J. Willis (Contact Author)

University of Florida Levin College of Law ( email )

P.O. Box 117625
Gainesville, FL 32611-7625
United States
(352) 273-0680 (Phone)
(352) 392-7647 (Fax)


Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics