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Ribbon's records to determine how costs could be controlled. Mr.
Abbene did not formally calculate the amount of income that would
be required to produce a profit, and he did not attempt to
project the amount of income necessary to produce a profit for
future years. Mr. Abbene never formally calculated the income
required to recover the losses sustained by Blue Ribbon during
the years in issue.
Although Blue Ribbon has operated at a loss every year since
its inception, Mr. Abbene has made no change to the manner in
which Blue Ribbon conducts its operations. Mr. Abbene cannot
presently say when or whether Blue Ribbon will become profitable.
Blue Ribbon's Forms 1120S reported the following income, expenses
(including depreciation), and net losses during the period from
1989 to 1994:
Expenses &
Year Income Depreciation Net Loss
1989 $13,000 $34,518 $21,218
1990 6,500 65,309 58,809
1991 1,785 59,584 57,799
1992 2,950 63,967 61,017
1993 313 62,951 62,638
1994 450 60,164 59,714
On its returns for taxable years 1989 through 1994, Blue Ribbon
claimed depreciation deductions relating to the assets used in
its operations despite the fact that Mr. Abbene never transferred
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Last modified: May 25, 2011