- 7 -
deductions shown, on Schedules K-1, Shareholder’s Share of
Income, Credits, Deductions, etc. Thomas Doran (Doran), a
C.P.A., prepared Southern Auto's tax returns for 1993 and 1994.
Doran said that the owners of Southern Auto provided the
information as to the percentages of stock ownership on the
Schedules K-1. Frank based the percentages on the dollar amounts
that each individual actually had been paid. According to an
undated memo to the file signed by Frank, Thomas, and Bob, “the
corporation profits would be dispersed to the shareholders (Tom,
Bob, and [Frank]) based upon the actual dollars received as a
percentage of the total.” This method of allocation was
presented to two accountants, at least one of whom was a
Certified Public Accountant, who told petitioners it was
acceptable to allocate the profit based on dollars received as a
percentage of the total dollars distributed.
According to Southern Auto's records, cash distributions to
Frank, Thomas, and Bob totaled $82,668 in 1993. Southern Auto's
distributive ordinary income as reported on the 1993 return was
$57,638. According to Southern Auto's records, cash
distributions to Frank, Thomas, and Bob totaled $135,529 in 1994.
Southern Auto's distributive ordinary income as reported on the
1994 return was $140,310.
The breakdown of the recorded cash distributions is set
forth under the heading of cash withdrawals. The percentage
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011