- 35 - transactions, not in yearend receivables. According to petitioners, measuring the historical relationship between annual bad debt writeoffs (net of recoveries) and total annual charges may be appropriate for estimating the portion of annual charges that are not likely to be collected but not for purposes of estimating the portion of yearend accounts receivable that probably will not be collected. Petitioners contend that the Amended Formula produces incorrect results and is contrary to the language and purpose of section 448(d)(5) because it requires the hospitals to accrue as income amounts which, based on experience, they will not collect.16 Petitioners assert that the Black Motor formula reasonably reflects their bad debt experience and should be applied in the instant case. Petitioners maintain that the Black Motor formula was intended to provide an estimate of future uncollectibility based on the taxpayer's actual recent collection experience. 16 According to petitioners, their tax department calculated that petitioners' actual bad debt experience with respect to accounts receivable outstanding at the end of 1990 shows that approximately 21.4 percent of those accounts receivable was uncollectible during 1991 and 1992. Moreover, with respect to accounts receivable outstanding as of specified dates in 1987, approximately 19 percent of those receivables was uncollectible within a period of 1 year, and approximately 22 percent to 24 percent would become uncollectible within 2 years. In contrast, petitioners contend, the Amended Formula produces exclusion ratios of between 3.4 percent and 5.3 percent of revenue for taxable year ended 1987 and between 2.6 percent and 4.0 percent of revenue for taxable year ended 1988, depending upon whether gross billings, billings net of contractual adjustments, or billings exclusive of Medicare and Medicaid billings are used to approximate annual charge transactions.Page: Previous 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 Next
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