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Dobbe; the Dobbes would then lend the money back to Holland
America to meet its business needs. The amount lent back was
added to the principal balance of the promissory notes payable by
Holland America to Mr. and Mrs. Dobbe. If the account balance
was negative (shareholders owed money to corporation), because
payments for Mr. and Mrs. Dobbe’s personal expenses exceeded the
rent and interest obligations, the balance was credited against
the principal of the promissory notes.
As of September 30, 1992 and 1993, Holland America owed Mr.
and Mrs. Dobbe $893,701 and $1,200,000, respectively. The
expenses at issue in this case were treated as business expenses
and not as personal expenses for purposes of the accounting
protocol described above.
1993 Deductions
Holland America claimed, and respondent disallowed, the
following deductions for FYE 1993:
Deduction Amount disallowed
Advertising (landscaping) $35,296
Supplies (groceries) 34,246
Small tools (solarium) 12,203
Miscellaneous expenses
Property tax 2,054
Hazard insurance premiums 350
Electricity 2,000
Employee relations (golf clubs) 1,455
Landscaping
In 1993, Holland America hired a landscaping service to
improve the grounds at 1066 South Pekin Road with extensive new
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