- 6 -
behalf of Al Zuni. Each year, Peck would use that information to
compute Al Zuni’s cost of goods sold.
Since 1980, Peck has been the preparer of Al Zuni’s
corporate Federal income tax returns and of Khalaf’s individual
Federal income tax returns.
Al Zuni’s corporate Federal income tax returns for 1989,
1991, and 1992 were untimely filed. Al Zuni has not filed a
signed Federal income tax return for 1990.
On Al Zuni’s 1989, 1990 (unsigned), 1991, and 1992 corporate
Federal income tax returns, there were reported each year the
following total costs for jewelry inventory purchased, sold, and
yearend jewelry inventory:
As Reported on Al Zuni's Federal Income Tax Returns
Cost of 1989 1990 1991 1992
Jewelry purchased $696,795 $1,242,051 $1,634,220 $1,845,156
Jewelry sold 560,426 985,030 1,536,380 1,908,386*
Ending inventory 246,369 503,390 601,230 - 0 -
* After subtraction of jewelry with a reported
cost of $538,000 to reflect transfer of the
jewelry inventory to Khalaf.
On Al Zuni’s 1992 corporate Federal income tax return, which
was prepared using the accrual method of accounting, the transfer
of jewelry to Khalaf was reflected as a “transfer”. The transfer
is not expressly reflected as either a sale or as a distribution
to Khalaf. On Al Zuni's 1992 corporate Federal income tax
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Last modified: May 25, 2011