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Petitioner's Certified Public Accountant
Philip Lamprecht of Jordan & Co. was petitioner's accountant.
Mr. Lamprecht recommended the amount of the rebates to be given to
each of petitioner's related stores. In making his
recommendations, which was done after consulting M. Kirkham, Mr.
Lamprecht considered the profitability of petitioner and its
related entities. He treated all the entities as one business
operation. In addition, Mr. Lamprecht analyzed the liquidity of
each of the related stores and the related stores' ability to pay
their receivables. He took that ability into consideration in
determining the amount of the rebate to be given to each store.
Petitioner's Bookkeeping
Petitioner and the related entities employed the accrual
method of accounting. Petitioner booked sales to both related and
unrelated entities when the merchandise was delivered, debiting
accounts receivable and crediting sales. Petitioner's related
stores accounted for the delivery of petitioner's merchandise to
the stores by crediting an account payable to petitioner and
debiting purchases.
Petitioner accounted for the rebates by crediting accounts
receivable and debiting sales, thereby eliminating the amount of
the rebate from accrued sales for Federal income tax purposes.
Petitioner's related stores to which the rebates were given
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Last modified: May 25, 2011