-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.
Page: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 NextLast modified: May 25, 2011