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(M. Forier) and Richard Forier (R. Forier) were petitioner's
officers and directors. F. Forier and M. Forier (the Foriers)
had signature authority over petitioner's bank accounts.
For the subject years, petitioner filed Federal income tax
returns purporting to utilize an accrual method of accounting.
On these returns, petitioner accrued and deducted unpaid expenses
of $286,665 and $199,994 for the respective subject years. The
$286,665 includes $200,000 in unpaid accrued wages to the
Foriers, and the $199,994 includes $18,250 in unpaid accrued
wages to the Foriers. The Foriers did not include these wages
in their income until petitioner actually paid them.1 Petitioner
had sufficient cash on hand to pay the accrued wages as of the
close of each taxable year.
Respondent determined and petitioner now agrees that
petitioner should have reported its income under the cash method.
Respondent disallowed the deduction of all unpaid accrued
expenses claimed on petitioner's returns. Petitioner concedes
the adjustments in each year except with respect to the unpaid
accrued wages to the Foriers. Petitioner contends that the wages
1The Foriers were cash basis, calendar year taxpayers.
Petitioner paid the $200,000 in wages accrued in 1990 in two
installments on June 30, 1992, and December 19, 1992, and the
Foriers included it in their income for 1992. Petitioner paid
the $18,250 accrued in 1991 on August 2, 1991, and the Foriers
included it in their income for 1991.
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