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the contract price that they remitted to third parties as
prepayments of service fees for administration of the VSC program
and an insurance premium for indemnification of their losses
under the program. If respondent prevails on these issues, we
must further decide whether the income of one of the dealerships
is subject to an additional adjustment pursuant to section 481.
We hold that the dealerships' method of accounting for VSC's
was not a proper application of the accrual method, and, except
in regard to the treatment of the dealerships’ administrative fee
expenses, we sustain respondent's revised adjustments in full.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulations of fact and attached exhibits are incorporated
by this reference. At the times they filed their petitions, the
Johnsons, the Herrings, and the Mungenasts were residents of, and
DFM Investment Co. maintained its principal place of business in,
the State of Missouri. The relationships between petitioners and
the dealerships whose method of accounting for VSC's is the
subject of controversy in these cases (collectively, the
Dealerships) are set forth below:
Corporate Doing Tax Status During Petitioners
Name Business As Taxable Yr.(s) At Issue Owning Shares
DFM Investment Co. St. Louis Honda Subchapter C corp. David Mungenast
(at least 82%)
DRK Investment Co. St. Louis Acura Subchapter S corp. David Mungenast
(100%)
Capco Sales, Inc. St. Louis Lexus Subchapter S corp. David Mungenast
(100%)
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Last modified: May 25, 2011