A bill to amend the Internal Revenue Code of 1954 to provide for a special tax accounting rule for the redemption of trading stamps and coupons.

(Reported to House from the Committee on Ways and Means with amendment, H. Rept. 95-1707)

Amends the Internal Revenue Code to permit an accrual basis taxpayer to deduct from gross income the cost of redeeming qualified discount coupons which were: (1) outstanding at the close of the taxable year; (2) received by the taxpayer before the close of the redemption period for the taxable year; and (3) incurred by the taxpayer during the taxable year. Stipulates that the redemption period for any taxable year is the six-month period immediately following the close of the taxable year, unless the taxpayer selects a shorter period.

Provides: (1) when such election shall be made; (2) that such election is binding for future years unless the taxpayer secures the consent of the Secretary of the Treasury to revoke it; (3) that such election applies to all qualified discount coupons issued by the taxpayer's trade or business; and (4) that the election of this method or a change to another method of accounting will be subject to the applicable rules governing accounting changes.

Requires the taxpayer to establish a suspense account for each trade or business in which an election is made, if such election would result in a net decrease in taxable income. Sets forth the formula to be used (1) in computing the initial opening balance of such suspense account and (2) in any annual adjustments made to such suspense accounts to account for fluctuations in redemptions.

Provides that if the taxpayer's election results in a net decrease in income, it is to be taken into income ratably over a ten-year period beginning with the year of change.

Permits the taxpayer to validate certain tax accounting methods used to account for discount coupons in years prior to the effective date of the Act.