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income tax returns on an accrual basis, using a tax year ending
June 30.2
During the years in issue, Alejandro Canelos Rodriguez (Mr.
Canelos) owned 57 percent of petitioner's common stock. His
cousin, Basilio Georgacopulos Kanelopulos (Mr. Kanelopulos),
owned 40.5 percent of the common stock, and Mr. Canelos' sister,
Juana Canelos de Castro, owned the remaining 2.5 percent. During
those years, Mr. Canelos served as petitioner's president and
chairman of the board of directors, and Mr. Kanelopulos served as
its treasurer.
During the years in issue, petitioner had warehouse
operations in both Arizona and California. Petitioner handled
produce year-round and was considered to be a major distributor
of fresh produce, in a normal year averaging 17 percent of the
entire U.S. fresh market tomato imports. Petitioner held a
license issued by the U.S. Department of Agriculture (DOA)
pursuant to the Perishable Agricultural Commodities Act (PACA),
ch. 436, secs. 3 and 4, 46 Stat. 531, 533, which permitted it to
sell and distribute produce in the United States. Petitioner's
main source of income came from providing produce distribution
services, and most of its costs were associated with providing
2Petitioner used a fiscal year ending Sept. 30 until Sept.
30, 1987. After that date, petitioner changed its accounting
period to a fiscal year ending June 30 for both book and income
tax purposes.
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