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testified about petitioners' practice of deducting the cost of
meals as "planning" sessions. He stated that petitioners went to
restaurants to plan their weekly activities for the day-care
service. He also testified that petitioners ate alone during a
majority of these meals. Petitioners also deducted the cost of
personal meals as client "prospecting" activities. Mr. Simpson
provided the Court with the following explanation for such
deductions:
THE WITNESS: Meals and entertainment was
basically that; we entertained people. We went -- we
would go to parks and see people with the children. We
would walk up to and start talking to them, become --
just be friendly, Your Honor, and we would, you know,
take them out to dinner and discuss -- in '92,
especially, basically, what they were looking for in a
child care so we could better cater to the needs of
what people wanted in child care, because we basically
didn't have any idea, you know.
* * * * * * *
THE COURT: $6,000 worth of meals in '92, and
$14,000 worth of meals in '93?
THE WITNESS: Well, $14,000 is -- we added
something to it instead of just meals, Your Honor.
It's also meals and entertainment, and we'd line itemed
in there I think it's approximately $2,000 worth of
video rentals for the year of '93, for, you know,
watching Disney and the things that we had to rent
movies and things of that nature.
THE COURT: You rented $2,000 worth of videos?
THE WITNESS: Yes, Your Honor, it goes pretty
fast. You know, you rent two or three videos a day or
every other day, it adds up over a year's time, yes.
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