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with an unrecovered cost of $141,206 and $130,622, for 1994 and
1995, respectively. It is unlikely that, by themselves, the
balance-sheet assets account for $2 million in gross receipts.
In addition to the balance-sheet assets, however, petitioner had
assets not shown on its balance sheets (the nonbalance-sheet
assets), viz, both the shareholder and nonshareholder employment
contracts, petitioner’s arrangement with the hospital to provide
on-call services in the hospital’s emergency room, and the
goodwill that petitioner undoubtedly built up during its almost
20 years of business in the Fort Worth area. Together, the
balance-sheet and nonbalance-sheet assets account for the in-
excess-of $2 million in gross receipts that petitioner reported
for each of the audit years. Respondent concedes (and petitioner
does not disagree) that petitioner made no profit on the
shareholder employment agreements. As stated supra, in section
II.B.1, respondent is willing to allow petitioner to deduct, as
compensation for services, collections attributable to the
shareholder surgeons less their allocable share of petitioner’s
expenses. Respondent believes, however, that petitioner has
understated its profit on the nonshareholder employment
agreements by both understating its collections with respect to
such agreements and overstating its overhead allocable to such
agreements. For 1994, respondent would reallocate collections
from the shareholder employment agreements to the nonshareholder
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