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Pariani, M.D., P.A. (the Association). During the years in issue
and during all times relevant to this case, Dr. Pariani was the
sole shareholder and president of the Association, performed
medical services for the Association, and had no supervisors.
Further, Dr. Pariani exercised supervision over the Association's
day-to-day affairs, and he was the only individual who
supervised, controlled, and directed the business of the
Association, including the making of management decisions. Also,
Dr. Pariani had authority to sign corporate checks on behalf of
the Association. Other doctors occasionally performed medical
services for the Association.
Asit Modak served as bookkeeper for Dr. Pariani starting in
1978, and also for the Association from its inception in 1982,
through the years in issue. He also prepared the tax returns of
the Association and of petitioners personally.
Tax Returns
On their 1989 tax returns, the Association and petitioners
were not consistent with respect to the way in which they
reported the compensation paid to Dr. Pariani. The Association
paid $51,418 to Dr. Pariani and deducted this amount as
compensation of officers. However, petitioners reported $51,418
as income from a sole proprietorship (i.e., self-employment
income). On its 1992 return, the Association reported that it
paid $8,000 to Dr. Pariani and deducted this amount as
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