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In 1992, petitioner placed 115,375 rolls of filament tape on
consignment with Advanced Coating. In this connection, on August
26, 1992, petitioner issued an invoice to Advanced Coating
showing the sale price of the tape as $80,762.50 for 115,375
rolls of filament tape, at 70 cents per roll. On his 1992
return, petitioner reported no income from the consignment to
Advanced Coating.
In 1993, Advanced Coating returned all of this tape as
defective. On May 12, 1993, petitioner gave Advanced Coating a
credit memo for $45,243 indicating that approximately 64,633
rolls had been returned. On his 1993 return petitioner claimed
$45,243 in returns and allowances in connection with the returned
tape previously consigned to Advanced Coatings. Since Advanced
Coating could use none of the tape, the invoice and credit memo,
taken together, reflect a substantial discrepancy in the amount
of tape consigned and the amount returned. Petitioner explained
this discrepancy as "Well, only because it was just a book entry.
It didn't really make any difference."
Petitioner paid no Federal income tax for the years 1991
through 1994. The following table reflects petitioner's wage
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