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a company known as Merka Jewelry and Trophies, Inc.,
for $29,550.00.
(d) On December 22, 1987, petitioner's president
Donald J. Marino paid $25,000.00 of the purchase price
described in subparagraph (c), above, with petitioner's
corporate check.
(e) When questioned by respondent's agent
regarding the payment described in subparagraph (d),
above, petitioner's president Donald J. Marino stated
that the purchase was for trophies.
(f) The $25,000.00 payment described in
subparagraph (d), above, was included in petitioner's
cost of goods sold on its tax return for the year ended
September 30, 1988.
(g) Petitioner provided funds to its president
Donald J. Marino to pay his and his family members'
personal expenses during the tax year ended September
30, 1988, in the amount of $253,602.00.
(h) Petitioner deducted $148,282.00 of the amount
described in subparagraph (g), above, as travel and
entertainment expenses on its tax return for the year
ended September 30, 1988.
(i) Petitioner deducted $105,320.00 of the amount
described in subparagraph (g), above, as research and
development expense on its tax return for the year
ended September 30, 1988.
(j) Petitioner directly paid and provided funds
to its president Donald J. Marino to pay his and his
family members' personal expenses during the tax year
ended September 30, 1989, in the amount of $152,706.00.
(k) Petitioner deducted the $152,706.00 amount
described in subparagraph (j), above, as travel and
entertainment expenses on its tax return for the year
ended September 30, 1989.
(l) Petitioner's president Donald J. Marino
endorsed and deposited a check in the amount of
$27,716.00 payable to petitioner from J&L Steel into
his personal bank account.
(m) The $27,716.00 described in subparagraph (l),
above, constitutes taxable income to petitioner for the
tax year ended September 30, 1988, which income was not
reported on its tax return.
(n) Petitioner deducted on its tax return for the
year ended September 30, 1988, subcontractor expenses
in the amount of $651,871.00.
(o) Petitioner only paid or incurred $294,801.00
of the subcontractor expenses described in subparagraph
(n), above.
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