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Petitioner hired Smith, Ortiz, Gomez & Buzzi, P.A. (SOGB), to
audit its tax years ended June 30, 1992, 1993, and 1994, and
prepare certified financial statements for those years. SOGB was
not informed that the ASA goods were on consignment.
Federal Income Tax Returns
VIG prepared petitioner's Federal income tax return for tax
year ended June 30, 1990, based on its certified financial
statement for that year. This return reported beginning inventory
of $2,389,349, ending inventory of $4,065,376, and purchases of
$12,093,315.
On approximately September 13, 1991, petitioner filed a Form
7004, Application for Automatic Extension of Time To File
Corporation Income Tax Return, requesting a 6-month extension. On
March 23, 1992, respondent received petitioner's return for tax
year ended June 30, 1991.
VIG also prepared petitioner's return for tax year ended June
30, 1991, based on its certified financial statement for that year.
This return reported beginning inventory of $4,065,376, ending
inventory of $3,074,506, and purchases of $11,700,786. No
discharge of indebtedness income related to the $2,031,778 ASA
trade account payable was reported on this return.
Petitioner's return for tax year ended June 30, 1992, was
based on petitioner's 1992 certified financial statements for that
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