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amount based on a particular procedure or on some other
negotiated per-case or per diem basis. Thus, in most cases, the
hospitals' itemized bills do not bear any particular relationship
to the amounts that the hospitals actually will be paid for the
services provided. See Hospital Corp. of America v.
Commissioner, T.C. Memo. 1996-105, for a detailed description of
the hospitals' billing practices and the insurers' payment
policies.
OPINION
An accrual method taxpayer generally must include a taxable
amount in income when all events have occurred that fix the right
to receive the income and the amount can be determined with
reasonable accuracy. Sec. 1.451-1(a), Income Tax Regs. Section
448(d)(5),9 however, provides that an accrual-method taxpayer is
not required to accrue income earned by the taxpayer with respect
to the performance of services which, based on experience, it
will not collect (i.e., the Uncollectible Amount) and for which
no interest is charged or no penalty is applied for overdue
9 Sec. 448(d)(5) provides as follows:
(5) Special rule for services.--In the case of
any person using an accrual method of accounting with
respect to amounts to be received for the performance
of services by such person, such person shall not be
required to accrue any portion of such amounts which
(on the basis of experience) will not be collected.
This paragraph shall not apply to any amount if
interest is required to be paid on such amount or there
is any penalty for failure to timely pay such amount.
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