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agreement they reached with Appeals Officers Johnson and
Sinclair. During the negotiations, Mr. Deaton informed Appeals
Officer Sinclair that petitioners would file their consolidated
1979 return using the hybrid method even though such return had
initially been prepared on the cash method and the time for
filing was near. Mr. Kown would not have agreed to adopt the
hybrid method for the 1972 and 1973 years had he known that the
IRS would object to its use for petitioners' returns filed for
subsequent taxable years.
In an attempt to memorialize his understanding of the
agreement with Appeals Officers Johnson and Sinclair, Mr. Kown
wrote them a letter on June 13, 1980, in which he outlined his
understanding of the proposed resolution of the accounting method
issue. Mr. Kown further stated that it was petitioners'
understanding that their agreement with respect to such issue
would be binding until Congress expressly prohibited the hybrid
method of accounting by hospitals. Mr. Kown sent the letter
prior to the time the stipulations regarding such issues were
prepared and filed with the U.S. Tax Court. He did not receive a
written response to his letter but he subsequently discussed it
in a telephone conversation with Appeals Officer Sinclair. At
such time, Appeals Officer Sinclair, while "making no promises",
indicated that he thought that the hybrid method would continue
to be followed unless a statutory change or a final controlling
court decision required a different result.
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