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1994, petitioner Sheila Smith, and petitioners' daughter, Tara
Smith, were also authorized to use the Gold card. The monthly
statements separately identified petitioner's, Sheila's, and
Tara's charges. Each of them regularly charged personal expenses
on the Gold card. Petitioners also had numerous Visa credit
cards which were used solely for charging personal expenses.
The monthly statements for both the Corporate card and the
Gold card were forwarded to Tracstar. Kathy Parsons, Tracstar's
bookkeeper during 1994, would review each of the itemized charges
and determine whether a charge constituted a business expense of
Tracstar or a personal expense. Regardless of the nature of the
charges, Tracstar would pay the entire account balance. To the
extent that personal expenses were charged to the Corporate Card
and the Gold card by petitioner and his family, the amounts of
such personal expenses which were paid by Tracstar were debited
to an account labeled "Due from Officer Smith" (the personal
expense account).5 Tracstar's balance sheet dated December 31,
1993, shows a debit balance in the personal expense account in
the amount of $19,717.28.
In early August of 1994, Tracstar's management, including
petitioner, decided to begin issuing periodic bonuses to its
5 This accounting procedure was not followed for the Dec.
22, 1994, Gold Card statement. Rather, after making her
determination of the personal versus business nature of the
expenses, Ms. Parsons forwarded the statement to petitioner for
him to pay in full and credited the personal expense account by
the amount of the business expenses for the billing period.
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