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usually featured live bands on Friday and Saturday nights.
The bar sold prepackaged snacks and had a pay telephone.
Ms. Crabtree handled all of the bookkeeping for the
package store and the bar during the years in issue. For
Federal income tax purposes, Crabtree Investments reported
income using the calendar year and a hybrid method of
accounting, the cash receipts and disbursements method for
sales, and the accrual method for purchases.
Petitioners’ accountant, Mr. Richard Morton, prepared
a general ledger and other financial records for Crabtree
Investments for each of the years in issue. The general
ledger for each year itemizes on a monthly basis the checks
written on a checking account at First Union Bank main-
tained on behalf of Crabtree Investments. Mr. Morton
prepared the general ledgers from the records that the
individual petitioners provided to him every month. These
records included Crabtree Investments’ check stubs, bank
statements, daily reports, and other records. On the basis
of that information, Mr. Morton reconciled the bank account
and prepared a sales journal, sales tax returns, payroll
reports, and payroll tax deposits. Mr. Morton also
prepared the corporation’s income tax returns from the
above information. Mr. Morton did the audit of the records
of Crabtree Investments.
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Last modified: May 25, 2011