- 4 -
waterfront construction. The other income account recorded
payments for materials that were sold by Allied, loan repayments,
and payments received in connection with a mortgage. During
1988, amounts recorded as other income included $7,991 of
payments received in connection with a mortgage held by
petitioner and Joseph Otrompke and a $75,000 loan made by
petitioner to Allied. The source of the balance of other income
deposited in 1988 is not reflected on Allied's books.
During 1988, Allied's books reflect that $2,850 of loans
were made to employees of Allied. During 1989, Allied's books
reflect that $14,175 of loans were made to employees of Allied.
Although Allied paid its officers $39,790 and $42,725 in
1988 and 1989, respectively, petitioner was not paid any salary
by Allied during 1988 or 1989. Allied paid petitioner's personal
expenses in the amounts of $44,855 and $35,604 in 1988 and 1989,
respectively.
Allied's 1988 Schedule L, Balance Sheet, of Form 1120S, U.S.
Income Tax Return for an S Corporation, set forth $75,000 as
outstanding shareholder loans at the end of 1988 and $129,168 as
total liabilities and shareholders' equity. Allied's 1989
Schedule L does not set forth any specific dollar amount
outstanding as shareholder loans at the beginning or end of 1989.
However, for 1989, beginning total liabilities and shareholders'
equity totaled $129,168, and ending total liabilities and
shareholders' equity for 1989 totaled $112,746.
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