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At all relevant times, Mr. Henry maintained the books and
records of Fred Henry's Paradise of Orchids and understood that
money received from the sale of orchid plants is taxable income.
Mr. Henry and Ms. Estes retained a tax return preparer (return
preparer) to whom they gave yearend information for use in
preparation of their tax returns. Mr. Henry and Ms. Estes used
the accrual method of accounting in reporting the income and the
expenses relating to Mr. Henry's orchid activity and reported
that income and those expenses in Schedules C of their tax
returns (Schedules C). All orchid plants in that activity were
included in the Schedules C as inventory. Costs associated with
the purchase and raising of those plants were either included in
inventory costs or expensed in the Schedules C.
At all relevant times, Fred Henry's Paradise of Orchids was
a wholesale, and not a retail, operation, although it occasion-
ally sold orchid plants at retail to members of orchid societies
and certain others who desired to purchase high quality orchids.
During 1991, many of the plants of Fred Henry's Paradise of
Orchids were sold to Selby Botanical Gardens (Selby), an impor-
tant botanical garden and world renowned orchid center whose
customers generally were interested in very high quality plants.
The other principal wholesale customers of Mr. Henry's orchid
activity during 1991 were Sagaert's Orchids in Lake Worth,
Florida, and Log Cabin Garden Center in St. Petersburg, Florida.
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Last modified: May 25, 2011