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Administration Co. opened a bank account in Administration
Co.'s name known as the Special E Account. The Special E Account
functioned generally as a checking account for its various
clients. Administration Co.'s books and records reflected each
client's balance in the account and also reflected deposits or
withdrawals affecting that client's account.
Administration Co. also maintained at its bank a second
account known as the Special Account that served more like a
savings or money market account. The moneys in this account were
used to buy certificates of deposit because a higher rate of
return could be realized by aggregating the funds to purchase
larger denomination certificates of deposit.
Funds from both the Special E Account and the Special
Account were lent to Administration Co. clients. Deposits to and
withdrawals from the Special E Account and the Special Account
were posted to the appropriate client accounts. If a client had
a negative balance in the accounts, that debit amount was
recorded as a receivable owed by the client to Administration Co.
Any positive balance a client had in the accounts was considered
money belonging to the client.
Administration Co. issued annual tax statements and reports
to its clients and the Internal Revenue Service (IRS) for the
interest earned by each client on that client's funds in the
Special E Account and the Special Account.
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