Hospital Corporation of America and Subsidiaries - Page 44

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          Inc. v. Commissioner, 90 T.C. 26, 32 (1988); secs. 1.446-                   
          1(c)(1)(ii), 1.451-1(a), Income Tax Regs.                                   
               Petitioners contend that respondent's determination                    
          requiring the hospitals to change from the hybrid method to an              
          overall accrual method was an abuse of respondent's discretion              
          because, during earlier audits, respondent had changed those                
          hospitals from the cash method to the hybrid method and, in                 
          subsequent audits, had reviewed and approved the use of the                 
          hybrid method.  Petitioners assert that, in changing the                    
          hospitals to the hybrid method, respondent necessarily determined           
          that the hybrid method clearly reflected the hospitals' income              
          and that during the years in issue there were no changes in the             
          law or the facts which would cause the hybrid method to fail in             
          continuing to reflect income clearly.  Accordingly, petitioners             
          contend, respondent cannot now change the hospitals to an overall           
          accrual method for the years in issue.                                      
               On the other hand, respondent contends that no change in               
          petitioners' method of accounting was approved by respondent as             
          clearly reflecting income when respondent's agents resolved the             
          examinations of petitioners' returns for taxable years ended 1972           
          through 1980.  Accordingly, respondent contends, the resolution             
          of those years by the agreement to use the hybrid method was                
          merely for "settlement" purposes.  Respondent also contends that            
          the hospitals purchased and sold inventory, and, consequently,              
          they must use an accrual method for the taxable years ended 1981            




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