- 5 -
petitioner liquidated most of its assets so that it would have
the funds to pay Mr. Ashare the $1,750,000. Petitioner reported
a $1,857,933 taxable loss for 1993, which, on February 14, 1994,
it carried back to 1990 to receive a $581,812 refund of taxes
paid for 1990. Petitioner's reported loss resulted in a reported
deficit of $89,855 in retained earnings on December 31, 1993,
which translates into a deficit of $1,463,768 in retained
earnings exclusive of the tax refunds of $733,006, $59,095, and
$581,812 described infra and supra. Petitioner's reported
balance sheet at the beginning and end of 1993 was as follows:
1/1/93 12/31/93
Assets:
Cash $146,130 $35,197
Mortgage receivable 11,000 11,000
Loan receivable 5,000 -0-
Prepaid expense 3,200 3,200
Refundable income tax 69,095 582,812
Investments--marketable securities 569,173 9,048
Depreciable property (net of depreciation) 197,164 187,113
Total assets 1,000,762 828,370
Liabilities:
Payroll taxes withheld 2,871 469
Accrued pension contribution 40,002 -0-
Loans from shareholders 8,800 916,756
Total liabilities 51,673 917,225
Shareholder's equity:
Common stock 1,000 1,000
Retained earnings (deficit) 948,089 (89,855)
Total shareholder's equity (deficit) 949,089 (88,855)
Total liabilities & S/H's equity (deficit) 1,000,762 828,370
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