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Medicare and Medicaid receivables in patient receivables for
purposes of calculating the revenue to be reported on the accrual
method.
1979-80 Audit
A team of revenue agents examined petitioners' returns for
the taxable years ended 1979 and 1980 and proposed in their RAR
to change, inter alia, the hospitals' method of accounting from
the hybrid method, or the hybrid method as modified, to an
overall accrual method. The reasons cited in the RAR were
essentially identical to the reasons cited in the RAR's for the
1972-73, 1974-75, and 1976-78 audits. In addition, the RAR
contended that the returns filed using the hybrid method, or the
hybrid method as modified, were difficult to audit.
At petitioners' request, the accounting issue was referred
for consideration to the Atlanta, Georgia, Appeals Office. The
Appeals Officer reviewing the returns for taxable years ended
1979 and 1980, Appeals Officer Griffin, concluded that the
accounting method issue adjustment for the years ended 1972 and
1973 appeared to have been computed as a change in method of
accounting, rather than as an adjustment relating to those years
alone and that use of the hybrid method as modified clearly
reflected income of the hospitals. Accordingly, in November 1986
Appeals Officer Griffin resolved the proposed accounting method
adjustment for the years ended 1979 and 1980 by permitting
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