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Mid-Del reported the following gross receipts, direct costs
associated with patient treatments, and gross profit for 1993,
1994, and 1995, using the cash method of accounting:
TYE Gross Other costs Gross Medical supplies and Medical supplies
receipts1 profit drugs included in and drugs as a
other costs percentage of
gross receipts
1993
amended2 $1,849,403 $643,959 $1,205,444 unknown unknown
1994 2,469,928 806,510 1,663,418 $806,510 33
1995 1,780,767 721,944 1,058,823 721,994 41
1 Net of returns and allowances, for 1994 and 1995.
2 Mid-Del originally reported its income for 1993 using an accrual method of
accounting. During an audit of its 1993 Federal income tax return, Mid-Del submitted
an amended return reporting its income and expenses for 1993 using the cash method of
accounting. The audit was closed by agreement using the figures reflected on the
amended return.
The combined average annual gross receipts of both
petitioners for the 3 years ending with the taxable years in
issue was less than 5 million dollars.
For accounting purposes, Mid-Del and PC each valued their
chemotherapy drugs and miscellaneous medications at actual cost.
As of taxable years ending April 30, 1994, and April 30, 1995,
PC's drugs on hand were valued at $44,593 and $42,143,
respectively. As of December 31, 1994, 1995, and 1996, Mid-Del's
drugs on hand were valued at $37,273, $60,382, and $67,634,
respectively.
Neither petitioner made any attempt to manipulate income or
expenses by deferring income or paying unnecessary expenses at
the end of the taxable year.
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