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3. Roofing Services Provided by Kelso
In 1994, Badell hired Kelso to construct a slate roof on the
Badells’ residence. Kelso usually gives estimates to customers
before beginning to work on projects. However, it did not give
B&W or the Badells an estimate of the cost of constructing the
roof on the Badells’ residence. Kelso began to construct the
roof in 1994.
Kelso billed B&W $49,000 on December 31, 1994, for
constructing the roof on the Badell residence. B&W made no
payments to Kelso until September 1997. Kelso did not try to
collect that amount for an extended period of time because its
personnel believed B&W was “working off” B&W’s charges for legal
services by constructing the roof on the Badell residence. Kelso
reported the $49,000 as income on its 1994 return, and on its
gross profit report for 1994. Kelso credited its accounts
payable to B&W for legal services by $49,000 as of December 31,
1994.
Kelso worked on the Badell residence from 1994 to 1999, for
which it billed B&W as follows:
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Last modified: May 25, 2011