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Memphis, Tennessee.
Petitioners' primary business is the ownership, operation,
and management of hospitals. A detailed description of
petitioners' hospital operations is set forth in Hospital Corp.
of America v. Commissioner, T.C. Memo. 1996-105, which will not
be reiterated here. Our findings of fact contained in that
Memorandum Opinion are incorporated herein. For clarity, some of
our findings of fact pertinent to the issue involved in the
instant opinion are repeated below.
For the years ended 1979 through 1986, petitioners operating
hospitals used either a hybrid or an overall accrual method of
accounting for reporting income for tax purposes. Additionally,
for those years some petitioners operating nonhospital businesses
used the cash method for reporting income for tax purposes. In
Hospital Corp. of America v. Commissioner, supra, we held that
petitioners' use of the hybrid method for the hospitals was
appropriate for the years ended 1981 through 1986, particularly
in view of the hospitals' operations.
For the consolidated return filed for the year ended 1987,
pursuant to section 448,3 petitioners not employing an overall
accrual method for computing taxable income for the years ended
3 Sec. 448, which was added to the Internal Revenue Code by
sec. 801 of the Tax Reform Act of 1986, Pub. L. 99-514, 100 Stat.
2345, provides generally that, with certain exceptions not
applicable in the instant case, a C corporation, a partnership
that has a C corporation as a partner, or a tax shelter may not
use the cash method of accounting to compute taxable income.
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