- 5 - Accordingly, for two of the reporting periods, McDonald received about two-thirds and Maynard about one-third of M&M’s income. In the third reporting period, Maynard received about 85 percent and McDonald about 15 percent. Respondent’s agents analyzed the ratio of hours spent during 1989 by Maynard and McDonald in preparing returns of M&M's clients and found it to be about 60 percent for Maynard and 40 percent for McDonald. Respondent, in the notices of deficiency, determined $214,393 of 1989 partnership income and attributed $79,661 to McDonald and $134,732 to Maynard. M&M did not have any employees, and petitioners were solely responsible for maintaining M&M’s books and records. Petitioners’ billing approach was to send a bill for services to clients and retain a copy for M&M’s records. When they received payment of a particular bill, M&M’s retained copy of the bill was discarded. Petitioners’ billing approach made it virtually impossible to verify whether M&M’s income was accurately reflected on its books and Federal partnership tax return and on petitioners’ Schedules K-1. M&M’s rate schedule, as of January 1, 1989, was $130 per hour for tax consulting or compliance work and a $275 minimum rate for individual tax return preparation. Petitioners would charge for giving advice, including advice given during telephone calls, with a one-tenth-hour minimum charge. The printed rate schedule contained the notation that, where advice resulted in substantial savings or was out of the ordinary, the billing mightPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011