- 58 -
We are persuaded that petitioners' use of the hybrid method
was particularly appropriate in view of the hospitals'
operations.
Respondent contends, however, that the hospitals' hybrid
method as modified and as further modified does not clearly
reflect income because it does not result in income substantially
identical to the income which would be reported under an overall
accrual method. Respondent contends that the substantial-
identity-of-results test focuses on whether there are substantial
accounts receivable. According to respondent, petitioners do not
pass the substantial-identity-of-results test because the
hospitals have title to a substantial amount of inventory and
have a substantial amount of accounts receivable.
The courts have applied a substantial-identity-of-results
test for determining whether there was an abuse of respondent's
discretion in not permitting a taxpayer with inventories to
continue to use the cash method of accounting under section
1.446-1(c)(2)(ii), Income Tax Regs. See Ansley-Sheppard-Burgess
Co. v. Commissioner, 104 T.C. at 377; see also Ralston Dev. Corp.
v. United States, 937 F.2d 510, 514 (10th Cir. 1991); American
Fletcher Corp. v. United States, 832 F.2d at 440; Asphalt Prods.
Co. v. Commissioner, 796 F.2d 843 (6th Cir. 1986), affg. in part
and revg. in part Akers v. Commissioner, T.C. Memo. 1984-208,
revd. per curiam on another issue 482 U.S. 117 (1987); Wilkinson-
Beane, Inc. v. Commissioner, 420 F.2d at 356; J.P. Sheahan
Page: Previous 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 NextLast modified: May 25, 2011