Hospital Corporation of America and Subsidiaries - Page 1

                                   107 T.C. No. 8                                     

                               UNITED STATES TAX COURT                                

                   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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