107 T.C. No. 8
UNITED STATES TAX COURT
HOSPITAL CORPORATION OF AMERICA AND SUBSIDIARIES, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket Nos. 10663-91, 13074-91 Filed September 17, 1996.
28588-91, 6351-92.
Ps own, operate, and manage hospitals and related
businesses. For taxable year ended 1987 and following
years, certain Ps elected to use the nonaccrual-
experience method provided pursuant to sec. 448(d)(5),
I.R.C. On audit, R determined that those Ps could not
use the nonaccrual-experience method to compute taxable
income for either 1987 or 1988 because Ps sold medical
supplies and because they could not determine the
portion of their income attributable solely to the
performance of services, or, alternatively, that if Ps
are entitled to use the nonaccrual-experience method,
they must use the formula set forth in amended sec.
1.448-2T(e), Temporary Income Tax Regs., 53 Fed. Reg.
12513 (Apr. 15, 1988), as applied to the portion of the
hospitals' income that R determined is attributable to
the performance of services. Ps claim that all of the
hospitals' income is attributable to the performance of
services and, therefore, they may use the nonaccrual-
experience method for all of their income, the amended
temporary regulations are invalid, and Ps may use the
formula originally set forth in sec. 1.448-2T(e),
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