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medical supplies used in the course of the diagnosis, prognosis,
or treatment of the hospitals' patients. Cf. secs. 1.448-
1T(e)(4), 1.448-2T(d), Temporary Income Tax Regs., 52 Fed. Reg.
22768, 22775 (June 16, 1987). Therefore, no allocation of income
between income attributable to the performance of services and
income attributable to medical supplies is necessary in the
instant case for the purpose of applying the nonaccrual-
experience method of accounting.
Accordingly, we hold that petitioners' hospitals may utilize
the nonaccrual-experience method of accounting for taxable years
ended 1987 and 1988. We hold further that the nonaccrual-
experience method is applicable to income relating to accounts
receivable attributable to medical services and accounts
receivable attributable to medical supplies.
To reflect the foregoing,
Appropriate orders
will be issued.
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