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YOC's Tax Returns and Respondent's Audit Determinations
For each of the years 1982 through 1986, YOC reported on its
corporate Federal income tax returns total retained earnings of
$118,956, $267,275, $515,486, $709,967, and $852,304,
respectively. During these years, however, YOC did not declare
and pay any dividends to either Elvin or its other shareholder,
Swisher.
For 1983, 1984, and 1985, in order to prepare the corporate
Federal income tax returns, YOC's tax return preparer was given
only YOC's general ledger. Detail on specific expenses,
reflected in YOC's journals, was not provided to the tax return
preparer. The tax return preparer was not requested to and did
not audit YOC's books and records.
The schedule below reflects for 1983, 1984, and 1985, YOC's
taxable income as reported on YOC's corporate Federal income tax
returns, YOC's taxable income as determined by respondent,1 and
YOC's underreported taxable income as determined by respondent
(namely, YOC's taxable income as determined by respondent less
YOC's reported taxable income).
1 YOC's taxable income as determined by respondent is based on
the adjustments described above and taking into account the fact
that some of the adjustments described above were not claimed as
business expense deductions on YOC's tax returns.
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