20
Payments in Issue
In 1987, Pertinax paid Mr. Munro $500,112 in salary and
$500,000 as a management fee, and he reported both amounts as
income on his Form 1040, U.S. Individual Income Tax Return, for
1987. Pertinax paid rent of $12,834 to Mr. Munro, and he
reported that amount on his 1987 individual income tax return.
Alondra paid $900,000 to Pertinax on June 26, 1987. The
payment was originally recorded in Account No. 1920, a suspense
and clearing account, but a substitute invoice reclassified this
expense under Account No. 6395, for management services to the El
Centro headquarters for Alondra. The following account numbers
were used by Pertinax, Alondra, UCIC, and Edco to classify
expenditures in certain expense categories that were paid to
Pertinax by Alondra, UCIC, and Edco and deducted as ordinary and
necessary business expenses for income tax purposes: Account No.
6395 for management services for the El Centro headquarters
office for Alondra; Account No. 5395 for branch management
services; and Account No. 6055 for general administration wages
for the El Centro headquarters.
In addition to the $900,000 payment to Pertinax, Alondra has
documented further payments to Pertinax during Alondra's fiscal
9(...continued)
slightly in excess of $714,246 in materials costs and $226,178 in
finance charges. Moreover, if we subtract the figures for 1988
and subsequent years, the savings allegedly achieved by Mr. Munro
over the period from 1975 through 1987 do not exceed $3,683,409
in materials costs and $1,166,412 in finance charges.
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