Highland Farms, Inc. and Subsidiary - Page 1

                                   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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