- 3 -
easy--in 2000, Lykins Financial’s income came exclusively in the
form of commissions on the sale of securities and investment
advice; Lykins Inc.’s income came exclusively from fees that it
charged for tax preparation and advice. But the formation of
Lykins Financial had led to few physical changes. The firms
shared the same office space, and had the same address, same
phone number, same copying machine and fax, same employee manual,
and even the same coffee machine. This all made segregating the
two firms’ expenses quite difficult. The firms also had no
written agreement defining whose employees were whose, and while
some employees worked only on financial services and investments
and some worked only on tax preparation, there were also some who
worked on both. Further complicating the situation, Lykins Inc.
provided overhead services such as reception and payroll to
Lykins Financial. It also continued to pay all the rent on the
shared office space, and all the employees’ wages and payroll
taxes. Lykins credibly testified that he gave up on dividing
expenses in a more sophisticated way, and simply allocated them
between the two companies based on his own estimate of each
firm’s share of their combined total hours worked.
Lykins Inc. and Lykins Financial did file separate corporate
tax returns. The Commissioner audited Lykins Inc., and issued it
a notice of deficiency for 1999 and 2000 after concluding that
the firm had become a “qualified personal services corporation”
Page: Previous 1 2 3 4 5 6 7 8 9 10 Next
Last modified: May 25, 2011