26 CFR § 1.513-6 - Certain hospital services not unrelated trade or business.
(1) The service is provided solely to hospitals that have facilities to serve not more than 100 inpatients,
(3) The service is provided at a fee not in excess of actual cost, including straight line depreciation and a reasonable rate of return on the capital goods used to provide the service. For purposes of this section, a rate of return on capital goods will be considered reasonable provided that it does not exceed, on an annual basis, the percentage described below which is based on the average of the rates of interest on special issues of public debt obligations issued to the Federal Hospital Insurance Trust Fund for each of the months included in the taxable year of the hospital duringwhich the captial goods are used in providing the service. Determinations as to the cost of services and the applicable rate of return should be made as prescribed by 42 U.S.C. 1395x(v)(1) (A) and (B) and the regulations thereunder (permitting a health care facility to be reimbursed under the Medicare program for the reasonable cost of (its) services, including, in the case of certain proprietary facilities, a reasonable return on equity capital). For taxable years beginning on or before May 14, 1986, the rate of return shall be one and one-half times the average of the rates of interest on public debt obligations described above which were in effect on or before April 20, 1983.
(b) Hospital defined. As used in this section the word hospital means a hospital described in section 170(b)(1)(A)(iii).
(c) Example. The provisions of this section are illustrated by the following example:
The data processing service constitutes unrelated trade or business because it is provided at a fee in excess of cost. The food service satisfies all three requirements of paragraph (a) of this section and does not constitute unrelated trade or business.
(d) Effective date. Section 513(e) and this section apply to taxable years beginning after December 31, 1953.