- 46 -
for taxable years ended 1972 and 1973. As will be discussed more
fully below, we conclude that the hybrid method of accounting
clearly reflects petitioners' income for the years in issue20
and, consequently, it was an abuse of discretion for respondent
to change petitioners to an overall accrual method of accounting
for the years ending 1981 through 1986.21 Accordingly, we need
not, nor do we, address herein the issue of whether respondent
changed the hospitals' method of accounting during an earlier
audit.22
20
As noted supra note 11, beginning in 1987, petitioners are
required by sec. 448 to use an overall accrual method.
21
Although petitioners contend in their briefs that the cash
method is an appropriate method of accounting for the hospitals,
they do not assert a claim that tax for each of the years ended
1981 through 1986 should be recomputed under the cash method, and
they concede that the hybrid method of accounting clearly
reflects their income for those years. Accordingly, we deem
petitioners' failure to assert a claim for recomputation of tax
under the cash method of accounting as a concession that income
should be reported on the hybrid method of accounting for the
years ended 1981 through 1986.
22
Respondent argues that the change of accounting method issue
is in reality a change from the cash method to the accrual
method. Respondent, however, does not seek to hold petitioners
to the cash method of accounting. Rather, respondent seeks to
impose a different method. Under such circumstances, the consent
of the Commissioner under sec. 446(e), which requires the
Commissioner's prior consent to a change of method of accounting
for computing income, generally is not required. See Convergent
Technologies, Inc. v. Commissioner, T.C. Memo. 1995-320 (“When
* * * [the Commissioner] does not seek to hold a taxpayer to a
previously adopted method of accounting but rather seeks to
impose another method in place of the one utilized by the
taxpayer, the consent of * * * [the Commissioner] under section
(continued...)
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