Southern Boiler Sales & Service, Inc. - Page 6

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          No. 2 filed corporate tax returns for its taxable years ending              
          April 30, 1990, and April 30, 1991, reporting the following:                
                     Item          FYE 4-30-90     FYE 4-30-91                        
               Gross Receipts      $248,662            -0-                            
               Costs of Sales      (47,754)            -0-                            
               Interest Income     3,861               -0-                            
               Other Deductions    (94,105)       ($29,303)                           
               Rental Expense      (11,690)            -0-                            
               Depreciation             -0-            -0-                            
          Berry gave petitioner's returns and No. 2's returns only a                  
          cursory review prior to signing and filing them.                            
               On audit, respondent determined that petitioner and No. 2              
          were one business and combined their gross receipts, costs of               
          sales, income, and expense items.  It is not clear from the                 
          notice of deficiency, the record in this case, or the parties'              
          arguments as to exactly how or on what basis (accrual, actual               
          receipt, and/or overlapping of fiscal years) the gross receipts,            
          costs of sales, income, and expense items were combined.2                   
          Petitioner has agreed that petitioner and No. 2 are one                     
          corporation and has conceded most of the adjustments in the                 
          deficiency notice.                                                          



          2  We note that the first 3 months of No. 2's FYE 4-30-90                   
          overlapped the last 3 months of petitioner's FYE                            
          7-31-89, and the last 9 months of No. 2's FYE 4-30-90 overlapped            
          the first 9 months of petitioner's FYE 7-31-90.  However, No. 2's           
          gross receipts, costs of sales, income, and deduction items                 
          apparently were not allocated one-fourth to petitioner's FYE                
          7-31-89 and three-fourths to petitioner's FYE 7-31-90.  The                 
          method of allocation used by respondent and accepted by                     
          petitioner is not disclosed by the record.  No. 2 filed only two            
          tax returns during its brief "existence".                                   



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