4
FY 1992 FY 1993 FY 1994
Gross receipts $2,839,130 $2,905,192 $2,822,943
Compensation of 165,223 272,000 269,000
officers
Salaries and wages 1,086,926 991,749 1,018,735
Repairs 26,605 26,459 15,651
Rents 59,338 32,807 33,336
Taxes 152,664 139,273 137,015
Interest 5,179 2,605 3,286
Contributions 4,325 7,745 9,591
Depreciation 75,988 63,943 54,550
Pensions, profit- 172,804 88,663
sharing plans
Other deductions1 995,464 976,003 1,050,076
Unappropriated 1,149,031 1,230,404 1,197,598
retained earnings
1 Petitioner's other deductions included expenses for
subcontractors, materials and supplies, equipment rental,
chemical analysis, waste disposal, trucks, insurance, travel,
office, legal and accounting services, permits, telephone, and
utilities.
Petitioner paid no dividends and had no inventory in fiscal
years 1992, 1993, and 1994.
C. The Audit and Respondent's Determination
In 1995, respondent audited petitioner's 1992, 1993, and
1994 fiscal years (FY). The record does not indicate who
respondent talked to or what documents respondent saw during the
audit.
On May 15, 1996, respondent notified petitioner, pursuant to
section 534(b), that respondent intended to issue a notice of
deficiency determining that petitioner is liable for the
accumulated earnings tax under section 531 for FY 1992, 1993, and
1994. Petitioner had 60 days to file a section 534(c) statement.
Sec. 534(c); sec. 1.534-2(d)(2), Income Tax Regs. On June 13,
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