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Petitioner became a U.S. corporation on April 18, 1985,2 by
filing an application for certificate of registration and articles
of continuance under Wyoming law. These documents list Casper,
Wyoming, as petitioner's corporate address. After the application
and certificate of registration were filed, all of petitioner's
U.S. tax returns state a Scottsdale, Arizona, mailing address.
On January 5, 1987, Mr. Leonard incorporated Leonard Pipeline
Construction Co. (LPCC), an S corporation, with petitioner
consenting to the use of its corporate name. In December 1987,
petitioner merged into the S corporation.
Accordingly, during the year in issue, petitioner’s sole
shareholder was RLLH, whose sole shareholder was Mr. Leonard.
Petitioner’s Financial Statements
Petitioner’s financial statements for fiscal years 1978
through 1987 were prepared using the percentage-of-completion
method of accounting for long-term construction contracts. Its
income tax returns, however, were prepared on the completed-
contract method. Consequently, the amounts reflected on its
financial statements vary from those reflected on its income tax
returns.
Petitioner reported the following amounts on its financial
statements:
2 Prior to becoming a U.S. corporation, petitioner filed
Forms 1120F, U.S. Income Tax Return of a Foreign Corporation.
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