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installment method of accounting to report income from land
sales. EIC also elected to report income based upon the install-
ment method. However, in October 1994, the Wangs filed an
amended return for 1990, while EIC filed amended returns for the
years 1990 and 1992 in September and June of 1994, respectively.
On these amended returns, the Wangs and EIC reported income from
land sales based on the cost recovery method of accounting. To
date, neither petitioner nor EIC has submitted to respondent a
Form 3115 requesting a change in their accounting method.
Transactions between the Wangs and EIC
As discussed, supra, the financial success of EIC is due in
large part to the efforts of petitioner and Mrs. Wang. Over the
years, the Wangs have been compensated for their hard work.
Petitioner and Mrs. Wang each received salaries of $223,250,
$283,200, and $114,417 from EIC in 1989, 1990, and 1991, respec-
tively. Furthermore, in 1990, EIC paid petitioner a bonus of
$500,000.
Petitioner has maintained a broker's license since the early
1970s, and he regularly acted as the broker in land sales
involving EIC. A number of independent agents also worked with
EIC in selling land.
EIC dealt almost exclusively in the purchase and sale of raw
land. Real estate agent commissions on sales of raw land are
significantly higher than those paid in connection with a sale of
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