- 42 -
adequately delineate accounts receivable arising from the sale of
medical services from accounts receivable arising from the sale
of medical supplies and, therefore, it is not possible to
segregate the hospitals' income between income earned from the
performance of services and income earned from the sale of
medical supplies. As a result, respondent argues, petitioners
may not utilize the nonaccrual-experience method for taxable
years ended 1987 and 1988.
Petitioners counter that the nonaccrual-experience method is
applicable to all of their accounts receivable because all of
their income is derived from the performance of services.
Alternatively, they contend that, even if a portion of their
accounts receivable is derived from the sale of medical supplies,
petitioners nevertheless are entitled to use the nonaccrual-
experience method with respect to that portion of their income
which is derived from the performance of services.
The nonaccrual-experience method is applicable only to
amounts to be received for the performance of services. Sec.
448(d)(5). Neither the Code nor the regulations promulgated
thereunder define what constitutes the performance of services
for purposes of section 448(d)(5). Presumably, the performance
of services would include activities in the fields of health,
law, engineering, architecture, accounting, actuarial science,
performing arts, and consulting. See sec. 448(d)(2) (defining a
Page: Previous 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 NextLast modified: May 25, 2011