- 5 -
It was not until either late January or early February 1991
that petitioner discovered that Mr. Morris had embezzled funds
from John Kenny Company. On August 6, 1991, petitioner and Mr.
Morris were divorced, principally because of Mr. Morris' embez-
zlement activities.
It was not until January 1991 that John Kenny Company
discovered that Mr. Morris had been embezzling funds. In Febru-
ary 1991, John Kenny Company and/or its owner, John Kenny, sued
petitioner and Mr. Morris to recover the embezzled funds. That
suit was settled in May 1991. As part of that settlement, the
beneficial interest in certain land located in Illinois that
Meadows held was transferred to John Kenny Company.
Corporations and Other Entities
that Mr. Morris Controlled
5(...continued)
receipts of $31,687 reported in the Form 1120-A that it filed for
its taxable year ended June 30, 1988, and all of the gross
receipts of $20,647 reported in the U.S. income tax return for an
S corporation (Form 1120S) that it filed for its short taxable
year 1988, and reduced that sum by certain income of Accu-Data
for 1988 that she determined did not result from the embezzled
funds; and (2) for 1989, respondent used all of the gross re-
ceipts of $6,000 reported in the Form 1120S that it filed for its
taxable year 1989, as reduced by certain income of Accu-Data for
that year that she determined did not result from the embezzled
funds. In determining how much of the embezzled funds Mr. Morris
reported as gross receipts of Meadows (1) for 1988, respondent
used all of the gross receipts of $22,482 reported in the Form
1120S that it filed for its taxable year 1988, as reduced by
certain income of Meadows for that year that she determined did
not result from the embezzled funds; and (2) for 1989, respondent
used all of the gross receipts of $86,355 reported in the Form
1120S that it filed for its taxable year 1989, as reduced by
certain income of Meadows for that year that she determined did
not result from the embezzled funds.
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