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cluster home liabilities and by $1,079,098, consisting of
cumulative unreported gain on cluster home sales and disallowance
of cluster home depreciation claimed through taxable year 1988.
Respondent has conceded the $5,001,633 adjustment. See supra
note 2.
Respondent recomputed deductions for charitable
contributions and net operating losses, calculated the
environmental tax and corresponding deduction, and allowed a
general business credit carryforward. On January 7, 1993,
respondent issued the notice of deficiency with the resultant
deficiency in tax in the amount of $2,531,650 and an addition for
substantial understatement of income tax under section 6661 in
the amount of $632,913.
OPINION
Entry Fees
Respondent argues that the entry fees are prepaid rent and
are includable in income in the year of receipt. Petitioner
contends the fees are neither rent nor payment for services,
characterizing these "deposits" merely as a means of financing
the construction of Highland Farms. Petitioner argues that its
reporting of income from the entry fees is consistent with its
method of keeping its books, and is thus a proper method of
accounting.12 Petitioner also argues that since petitioner has
no guarantee it will be allowed to keep the entire amount of any
12 Petitioner also notes that its bookkeeping is in
accordance with AICPA's Statement of Position 90-8 entitled
"Financial Accounting and Reporting by Continuing Care Retirement
Communities", published November 28, 1990.
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