Hospital Corporation of America and Subsidiaries - Page 29

                                       - 29 -                                         
          section 1.446-1(a)(4)(i), Income Tax Regs.  The RAR further                 
          asserted that the existence of merchandise inventories required             
          the hospitals to use an overall accrual method.                             
               In disagreeing with the proposed adjustments, petitioners              
          contended that they were entitled to use the cash method in                 
          reporting their income because the hospitals merely used or                 
          consumed various medical supplies in the course of providing                
          typical hospital services.  Subsequently, the Commissioner issued           
          a notice of deficiency for the years ended 1972 and 1973.                   
          Petitioners timely filed a petition in the U.S. Tax Court                   
          challenging the proposed change in accounting method as well as             
          certain other determinations of the Commissioner.  The issues               
          raised in the petition, including the accounting method                     
          adjustment, were then referred for consideration to the IRS                 
          Appeals Office in Nashville (Nashville Appeals Office).  The                
          Nashville Appeals Office considered the case in early 1980.12               


          12                                                                          
               Respondent objects to the admission of evidence relating to            
          consideration of the proposed adjustments for the years ended               
          1972 and 1973 by the Nashville Appeals Office on the ground that            
          the discussions with the Appeals officers were settlement                   
          negotiations and, thus, evidence relating to such matters is                
          inadmissible pursuant to Fed. R. Evid. 408, which generally                 
          renders inadmissible evidence of compromises and offers to                  
          compromise.  We have held in a prior opinion in the instant case            
          that evidence relating to the resolution of such matters is not             
          excludable under Fed. R. Evid. 408 because the evidence was not             
          presented to show the validity or invalidity of petitioners'                
          claim that the hybrid method clearly reflects income.  Hospital             
          Corp. of America v. Commissioner, T.C. Memo. 1994-100; see also             
          Wentz v. Commissioner, 105 T.C. 1, 5-7 (1995).                              




Page:  Previous  19  20  21  22  23  24  25  26  27  28  29  30  31  32  33  34  35  36  37  38  Next

Last modified: May 25, 2011