106 T.C. No. 12
UNITED STATES TAX COURT
HIGHLAND FARMS, INC. AND SUBSIDIARY, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 6642-93. Filed April 17, 1996.
P, an accrual basis taxpayer, operates a
continuing-care residential retirement community that
has five types of accommodations: cluster homes or
condominiums; apartments; a lodge; a rest home; and a
skilled nursing health-care center. The rest home and
health-care center are not involved in this case. The
residents purchase the cluster homes or condominiums
for the full purchase price and pay the taxes,
insurance, and utilities for their unit. The cluster
home or condominium owner can transfer the unit only to
P which must repurchase the unit at certain percentages
of the original purchase price during the first 7 years
after purchase and thereafter at not less than 76
percent of the original purchase price. The residents
of the apartments and the lodge must pay a lump-sum
entry fee before taking occupancy and must thereafter
pay a monthly rent. Except for the first 10 percent,
the entry fees for the apartments are refundable on a
prescribed percentage basis over a 5-year period.
Except for the first 5 percent, the entry fees for the
lodge are refundable on a prescribed percentage basis
over a 20-year period.
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