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Postage and delivery 87
Amortization-organization cap 135
Bank charges 55
Total deductions 58,363
Ordinary loss (36,394)
Attached to Malibu's 1988 return are two Schedules K-1,
Shareholder's Share of Income, Credits, Deductions, Etc.
Mr. Herbel's Schedule K-1 reports $3,639 as his
distributive share of Malibu's loss, and Mr. Webb's
Schedule K-1 reports $32,755 as his share.
Upon audit of Malibu’s return for 1988, respondent
determined that Malibu had understated its gross receipts
by $1,825,086. Respondent's agent made the following
explanation of this adjustment:
It is determined that payments made to you by
Arkla, Inc. and Subsidiaries under a "take or
pay" contract, in the amount of $1,825,086.00
were not reported by you on your 1988 tax
return. Therefore, taxable income is increased
$1,825,086.00 for 1988.
The following schedule summarizes the amounts reported
on Malibu's 1988 return, and the adjustments determined by
respondent:
Malibu's
1988 Return
on Form 1120S Per Return Adjustments Corrected
Gross receipts $24,914.00 $1,825,086.00 $1,850,000.00
Cost of goods sold (2,945.00) -- (2,945.00)
Total income 21,969.00 1,825,086.00 1,847,055.00
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