- 6 - petitioner's management determined that Adult Fun was not doing well, and petitioner made further advances to Adult Fun. By November 1990, Adult Fun ceased its payroll, and released its employees. In early 1991, Adult Fun closed its store and discontinued its business activities. On April 10, 1992, petitioner and Adult Fun agreed that petitioner would be assigned Adult Fun's leasehold improvements on account of the $30,035 in advances ($29,585 + $450) made by petitioner to Adult Fun. The parties agreed that the value of the assigned property was $21,000. For Federal income tax purposes, Adult Fun reported net operating losses (NOL’s) of $71,032 and $40,083 for its 1985 and 1986 taxable years, respectively. For its 1987 taxable year, Adult Fun reported taxable income (before application of any net operating loss deduction) of $105,115. All of this income was attributable to cancellation of debt. For its 1988 and 1989 taxable years, Adult Fun reported no gross receipts and no taxable income. For its 1990 taxable year, Adult Fun reported total income of $3,662 and a taxable loss (before application of any net operating loss deduction) of $4,266. Petitioner engaged Modern Bookkeeping Services, Inc. (MBS), another Mohney related entity, to provide it with bookkeeping and tax preparation services. MBS retained David Shindel (Mr. Shindel), a certified public accountant, to prepare petitioner’s Federal income tax returns. Mr. Shindel preparedPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Next
Last modified: May 25, 2011