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tax, or financial matters.
During the years 1986 through 1989, Mr. Sutton maintained a
personal checking account at NCNB National Bank (NCNB). During
the years 1989 and 1990, the Suttons maintained a personal
checking account at First Citizens Bank & Trust Company (FCB).
The corporate petitioner had both checking and savings accounts
at FCB during its taxable years ended September 30, 1987 through
1990. The bank statements covering the periods at issue for all
of the above checking accounts show numerous charges for checks
returned for insufficient funds.
Rebates and Coupons
The corporate petitioner received rebate checks from various
wholesalers or vendors. Fred Sutton had initiated an accounting
procedure for the rebate checks whereby the amounts of such
rebate checks were to be recorded on the corporate petitioner's
sales summaries (known, and hereinafter referred to, as the green
sheets) in a column entitled "Rebates". The corporate
petitioner's accountant reduced cost of sales by a credit
adjustment to purchase expenses; i.e., deducting the amount of
the rebates from the purchase expenses.
The corporate petitioner accepted coupons from its
customers. The total cost of a grocery item was initially rung
up on the cash register, and then the coupon amount was rung up
on the cash register as a deduction from the customer's bill,
with the customer paying the balance. The coupon amount was
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