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from Avant-Garde to WAI. CPI never issued any stock, and
it never filed a Federal income tax return.
Mr. Whelpley undertook the work relating to the CPI
project through WAI rather than CPI. WAI received the
funds advanced by Weeden for the project, and WAI deducted
expenses relating to the project on its income tax return.
Weeden advanced a total of $103,093 to WAI for the CPI
project in 1987. A memorandum written by Mr. Whelpley
states that "bills [were] written to CPI by WAI" for this
work. WAI included the funds advanced by Weeden in the
gross income reported on its 1987 income tax return.
In addition to the advances for the CPI project,
Weeden transferred funds to WAI as compensation for
Mr. Whelpley's consulting services in connection with
unrelated matters. WAI included these other funds in gross
income, and they are not at issue.
At the end of 1987, Weeden's general ledger trial
balance included an account labeled "RECEIVABLE FROM CPI"
which had a debit balance of $103,092.89. The trial
balance also included an account labeled "PROFESSIONAL
FEES - CONSULTANTS." Based upon the entries in these
two accounts, it appears that during 1987, payments to
"Whelpley Associates" were initially booked to PROFESSIONAL
FEES-CONSULTANTS and were reclassified at the end of the
year to RECEIVABLES FROM CPI.
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