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Gilchrist resided, and Door Control Services, Inc., had its
principal place of business, in Ben Wheeler, Texas.
In 1973, the Gilchrists entered into the business of
servicing automatic doors. On October 18, 1984, Door Control
Services, Inc. (Door Control), was incorporated under Texas law.
The Gilchrists were the only directors, officers, and
shareholders of the corporation. From 1973 to 1988, the business
was located in Tyler, Texas, where the Gilchrists resided with
their four young children. In October of 1988, the family and
the business moved to Ben Wheeler, Texas.
Mr. and Mrs. Gilchrist were both involved in conducting the
business. While Mrs. Gilchrist managed administrative matters,
Mr. Gilchrist supervised the corporation's employees. Mrs.
Gilchrist deposited Door Control's cash receipts in bank
accounts, wrote corporate checks, and maintained financial
records for the corporation. The Gilchrists hired Earl D. Crim,
Jr., a certified public accountant, to prepare corporate and
individual Federal income tax returns relating to the years in
issue.
At the beginning of each year, Mr. Crim typically would
execute an engagement letter with each of his clients.
Consistent with that practice, in each year that he prepared
returns for petitioners, he sent an engagement letter to the
Gilchrists (concerning their individual return) and one to Door
Control (concerning its corporate return). The engagement
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Last modified: May 25, 2011