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Petitioners elected to use the periodic system6 of the
nonaccrual-experience method to estimate on a hospital-by-
hospital basis the portion of their income they would not collect
(sometimes hereinafter referred to as the Uncollectible Amount),
except that petitioners computed the Uncollectible Amount by
using the formula (Original Formula)7 set forth in section 1.448-
2T(e)(2)(i), Temporary Income Tax Regs., 52 Fed. Reg. 22775 (June
16, 1987) (Original Temporary Regulations), rather than the
formula (Amended Formula) set forth in amended section 1.448-
2T(e)(2), Temporary Income Tax Regs., 53 Fed. Reg. 12513-12514
(Apr. 15, 1988) (Amended Temporary Regulations). Hereinafter, we
sometimes will refer to the method petitioners used to compute
the Uncollectible Amount for years ended 1987 and 1988 as the
modified periodic system.
For taxable years ended 1987 and 1988, petitioners reduced
(or increased) income of each hospital by the sum of (1) net
5 (...continued)
collect. Sec. 448(d)(5). See infra pp. 17-21 for a detailed
description of the nonaccrual-experience method. Pursuant to
sec. 1.448-2T(h)(1), Temporary Income Tax Regs., 52 Fed. Reg.
22776 (June 16, 1987), consent to a change to the nonaccrual-
experience method is granted automatically if the taxpayer is
qualified to use that method.
6 The periodic system of the nonaccrual-experience method,
described in Notice 88-51, 1988-1 C.B. 535, is similar to a
reserve system. See infra pp. 20-21 for a detailed description
of the periodic system.
7 The parties agree that the Original Formula is identical to
the Black Motor formula.
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