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Mr. and Mrs. Thorpe also entered into an auto insurance
contract for both of the vehicles. The insurance contract shows
a vehicle-use designation for each automobile. The insurance
contract, like the lease agreement, indicates that the Mercury
was to be used for business. However, the vehicle-use indication
for the Lincoln is marked as personal.
Throughout the years in issue, both ETCO and Mr. and Mrs.
Thorpe used the services of Mr. Lewis Buck, a certified public
accountant, to help maintain their books and records. Mr. Buck
also performed annual audits for ETCO and prepared tax returns
for both ETCO and Mr. and Mrs. Thorpe.
Mr. Buck determined the amount of business usage of the
leased vehicles based on a 12-month period. Mr. Buck discussed
the amount of personal usage for each of the vehicles with Mr.
and Mrs. Thorpe and analyzed the check register, lease
agreements, odometers, daily logs, and other documents to
determine that Mr. and Mrs. Thorpe should reimburse ETCO for
personal use of the two automobiles. At the end of each yearly
audit, Mr. Buck would have a meeting with Mr. and Mrs. Thorpe and
the officers of ETCO to review items and make recommendations.
At the expiration of the auto leases in December 1993, Mr. Buck
recommended that Mr. and Mrs. Thorpe reimburse ETCO for the
amount of personal use for each of the vehicles during the lease
term. Mr. Buck determined that Mr. and Mrs. Thorpe should pay
ETCO for 25 percent of the use of the vehicles. On December 3,
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