Cordes Finance Corporation - Page 6

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                loans.  The balances of petitioner's deferred interest                                   
                account for the years 1984 through 1990, as reported on                                  
                the balance sheets attached as Schedule L to petitioner's                                
                Federal income tax returns, are as follows:                                              
                                              Deferred Interest                                          
                                  Year        Per Schedule L                                             
                                  1984        $5,045,821.33                                              
                                  1985        5,354,536.83                                               
                                  1986        5,799,020.10                                               
                                  1987        6,564,988.00                                               
                                  1988        7,569,183.00                                               
                                  1989        7,485,966.00                                               
                                  1990        7,772,543.00                                               

                Prior to respondent's audit, petitioner's employees had                                  
                not reconciled the deferred interest income account with                                 
                the customer ledger cards for approximately 20 years.                                    
                      Mr. Robert Hinman, the managing principal of the                                   
                Lawton office of an accounting firm, was responsible for                                 
                the preparation of petitioner's tax returns from 1987                                    
                through the year in issue.  At no time did Mr. Hinman                                    
                examine petitioner's method of accounting for interest                                   
                income to determine whether it was consistent with                                       
                generally accepted accounting principles, the Internal                                   
                Revenue Code, or applicable Treasury regulations.                                        
                      Petitioner reported interest income for Federal income                             
                tax purposes for the years and in the amounts as follows:                                

                                  Year            Amount                                                 
                                  1984        $923,185.00                                                
                                  1985        1,007,549.50                                               



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