- 44 - 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 1981Page: Previous 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 Next
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