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In 2001, Flair Enterprises purchased gocarts costing
$2,160.70 and deducted the cost under miscellaneous expenses.
The gocarts were bought with company funds by petitioner as toys
for his grandchildren. Also in 2001, a storm shelter was
purchased for $5,670 by Flair Enterprises and deducted as an
office supplies expense of the company. The storm shelter is
located at petitioners’ personal residence inside their garage;
nothing related to the Flair Body Works business is stored in the
shelter. During the years in issue, numerous dry cleaning bills
were paid by Flair Enterprises for petitioners and their family
members. Department store and gift shop purchases were also
reimbursed as business expenses of the company, for which no
substantiation of business purpose has been provided.
No substantiation of deductibility has been provided for
numerous company checks made payable to petitioners’ sons. For
example, no explanation has been provided for reimbursements to
Phillip Haney by Flair Enterprises for dog food and a tee ball
glove, which were deducted as shop supply expenses. During the
years in issue, Flair Enterprises deducted loan payments made on
Mrs. Haney’s Mercedes and Gina Haney’s Suburban vehicles. One
$3,325.32 check to Mercedes Benz of OKC was categorized on the
company’s books as a “Materials” expense. Flair Enterprises
deducted numerous payments related to petitioners’
grandchildren’s school and extracurricular activities. In 2000,
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Last modified: November 10, 2007