- 17 - Petitioner's Financial and Tax Accounting Since its incorporation on February 25, 1969, petitioner has consistently maintained its books and records, and filed its corporate tax returns, on the accrual method of accounting, using a taxable year ending December 31. Its tax accounting has been consistent with its financial accounting. On November 28, 1990, the American Institute of Certified Public Accountants (AICPA) released its Statement of Position 90- 8 entitled "Financial Accounting and Reporting by Continuing Care Retirement Communities" (SOP 90-8). SOP 90-8 addressed financial accounting standards, not tax accounting standards, providing guidance on applying generally accepted accounting principles to transactions resulting from continuing-care contracts. The provisions of SOP 90-8 were effective for fiscal years beginning on or after December 15, 1990, but accounting changes made so as to conform to SOP 90-8 were to be applied retroactively. Petitioner's accountant, David Worley, reviewed petitioner's accounting methods and found them to be in compliance with SOP 90-8. In its books, petitioner recorded the entry fees in "Advance deposit" account numbers 261 and 262 for the apartments and the lodge, respectively. The entry fees were not placed in escrow. Petitioner recorded 20 percent of the apartment entry fees as income in the year of receipt, and an additional 20 percent per year for the next 4 years, reducing account 261 accordingly. With respect to the lodge entry fees, petitioner recorded 5 percent as income in the year of receipt and the remainder overPage: Previous 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Next
Last modified: May 25, 2011