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covered only approximately the first 6 months of 1990, and DAC
covered only approximately the last 6 months of 1990.
Recognizing this problem, petitioner set out to consolidate
the MYM and DAC expense records by transferring the MYM expenses
into the DAC system. To accomplish this, petitioner created a
summary of the MYM expenses (MYM Summary). The MYM Summary is
dated December 31, 1990. On the same date, petitioner
transferred each expense from the MYM Summary into the DAC
system. This transfer is recorded on the DAC General Ledger
Listing Report (DAC Ledger) dated December 31, 1990, at 10:29
a.m.
On December 31, 1990, at 4:47 p.m., petitioner created his
DAC Accounting Summary. This summary lists total DAC system
expenses by account number under the column heading "Balance
YTD".
Therefore, when petitioner completed the entries on December
31, 1990, he had successfully accomplished his goal of
consolidating the locksmith business expenses for the entire year
into one system, the DAC system.
Petitioner prepared the 1990 joint Federal income tax return
on April 15, 1991, more than 3 months after he had consolidated
his expenses in the DAC system. To prepare the tax return, he
created a series of numbered tally sheets called "scratch pads"
on his computer. The purpose of the scratch pads was to give
petitioner the dollar amount for total business expense items by
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