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Transaction Date1 Amount Reference
May 5, 1988 $43,092.89 Write off Loss in CPI
July 31, 1988 10,000.00 Loss in CPI/Re: Mgt. Fee
Aug. 31, 1988 10,000.00 Loss in CPI/Re: Mgt. Fee
Sept. 30, 1988 10,000.00 Loss in CPI/Re: Mgt. Fee
Oct. 31, 1988 10,000.00 Record loss from CPI Rec
Nov. 30, 1988 10,000.00 Loss from Uncollect Rec
Dec. 31, 1988 10,000.00 Loss Uncollect Rec-CPI
1The "transaction date" indicates the dates on which these items
were written off in Weeden's books rather than the dates on which the
cash was transferred.
In this manner, Weeden wrote off the balance in the account
labeled RECEIVABLE FROM CPI. On its Form 1120, U.S.
Corporation Income Tax Return for 1988, Weeden claimed a
bad debt deduction in the amount of $103,093, the amount it
had advanced for the CPI project.
Beginning in September 1989, respondent examined WAI's
returns for 1987, 1988, and 1989. During the examination,
WAI's representatives raised the issue whether WAI had
erred by including in WAI's gross income for 1987 the
advances that had been made by Weeden during the year.
WAI's representatives took the position that the advances
constituted either equity investments in WAI or loans to
WAI which, in either event, should not have been included
in petitioners' gross income in 1987.
A letter dated September 18, 1991, from Mr. Flaherty
and addressed to Mr. Whelpley at WAI, states that Weeden
considered the subject advances as loans to WAI, and
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Last modified: May 25, 2011