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not separately account for each session of bingo but rather treated
all three nightly sessions as a single undertaking. All expenses
for the supplies were borne evenly by the sponsoring organizations.
In 1994, the City of Hampton audited the bingo operations
conducted at Buckroe. The City of Hampton determined that the
sponsoring organizations were not in compliance with State and
local laws governing the operation of bingo games; changes were
thereafter made in order to have the sponsoring organizations
comply with the applicable laws.
Internal Revenue Service Examination
In early 1995, the Internal Revenue Service (IRS) began an
examination of both 4 Leaf Corp. and petitioners as part of a
“bingo project” jointly conducted by the IRS’ Examination and
Exempt Organizations Divisions. The agent coordinating the bingo
project, Revenue Agent Gross, requested Mr. Bullock to produce the
records of 4 Leaf Corp.; Mr. Bullock told Revenue Agent Gross to
see Mr. Schefletle, 4 Leaf Corp.’s accountant. Because the records
of 4 Leaf Corp. were incomplete, Mr. Schefletle had to reconstruct
the corporation’s general ledger and income statements. The only
revenues reported on the reconstructed corporate books and on 4
2(...continued)
accountability sheets was incomplete and/or absent.
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