Rule of 78s

Rule of 78s

Rule of 78s means:
a method of calculating the interest deduction for a short-term installment loan. It uses a formula for allocating interest in a manner similar to the sum-of-the- years'-digits depreciation. The U.S. Internal Revenue Service no longer permits the use of the Rule of 78s for tax purposes, arguing that it does not reflect the cost of the loan to the borrower. The U.S. Internal Revenue Service (IRS) later requires the use of economic accrual of interest for calculating interest deductions.

See Depreciation in the United States Encyclopedia of Law and Depreciation in the World Encyclopedia of Law.


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