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commission. The gross profit from the cars was allegedly
determined after the expenses attributable to the cars were paid,
which included commissions paid to salespersons, but before
payment of expenses such as building expenses, rent, and salaries
of the administrative staff. Frank further testified that after
all expenses of the business were paid, the net profit would be
split by the shareholders. At trial, Frank claimed the
shareholders in 1993 and 1994 were Thomas and himself.
The testimony regarding the computation of the amounts paid
to Frank, Thomas, and Bob, the amounts that should have been paid
to each, and the number of shareholders was not consistent with
the written documentation. Further, Frank’s claim that the three
men split the gross profits from the sale of cars is questionable
because Southern Auto’s sole source of income was the sale of
cars and if all car profits were divided there would be nothing
left to pay the building and other administrative expenses.
In practice, Frank usually would not take his share because
of Southern Auto's cash-flow problems. He believed that Thomas
and Bob should take the money because they had no other source of
income to support their families. Apparently, Thomas and Bob
took money from the business as they needed it.
On Southern Auto's 1993 and 1994 tax returns, which were
signed under penalty of perjury, Frank, Thomas, and Bob were
listed as shareholders, with their shares of income, credits, and
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Last modified: May 25, 2011