Laura E. Austin - Page 13

          Commissioner, 51 F.3d 34, 35 (5th Cir. 1995); Swanson v.                    
          Commissioner, 106 T.C. 76, 102 (1996).  We follow that approach             
          here and separately discuss whether respondent's position on each           
          issue she conceded was substantially justified.                             
          The Method of Accounting Issue                                              
               Respondent concedes that ASAP is a S corporation that is               
          engaged in a service business, has never had gross receipts in              
          excess of $5 million, and has always used the cash method of                
          accounting.  However, in support of her notice of deficiency,               
          respondent argues that ASAP's use of the cash method of                     
          accounting does not produce a clear reflection of income, because           
          ASAP accounts for the wages it pays the nurses as a current                 
          deduction, but does not take into income the payments from its              
          clients until they are received.  According to respondent, the              
          difference in time of when ASAP takes the current deduction for             
          the wages expense and the subsequent revenue into income produces           
          a distortion in its reported income.  As evidence that ASAP's               
          method does not produce a clear reflection of income, respondent            
          determined that under the accrual method ASAP's income for 1990             
          would be increased by $246,536.  Finally, respondent contends               
          that if petitioners are to establish that respondent has abused             
          her discretion in determining that ASAP's method of accounting              
          did not produce a clear reflection of income, petitioners must              
          demonstrate substantially identical results between ASAP's method           
          of accounting and the method selected by the Commissioner.                  

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