Midwest Stainless, Inc. and Robert A. and Mary J. Lechner - Page 6

                                                - 6 -                                                  

            was to treat the $239,594.68 as revenue of Stainless, which                                
            reported it as such for corporation income tax purposes.  The                              
            payments of the expenses by Mr. Lechner were treated as reducing                           
            the receivable and were reported by Stainless as deductible                                
            expenses for corporation income tax purposes.                                              
                  In defending himself in the criminal tax case, Mr. Lechner                           
            paid $134,108.54 between October 1, 1993, and September 30, 1994,                          
            to his attorneys (hereinafter “defense fees”).  The defense fees                           
            were paid from Mr. Lechner’s individual resources and not from                             
            funds of Stainless.  After Mr. Lechner paid the defense fees,                              
            Stainless deducted them on its corporation income tax return for                           
            the fiscal year ended September 30, 1994.                                                  
                  Stainless did not reimburse Mr. Lechner in cash or by check                          
            or in goods or services for his payments of the defense fees.                              
            However, Stainless reduced the debt owed to it by Mr. Lechner in                           
            the amount of the defense fees and made a journal entry in its                             
            books of account to reflect the reduction, in the same way that                            
            it reduced the debt owed by Mr. Lechner to reflect his payments                            
            of expenses attributable to jobs in progress of the sole                                   
            proprietorship.  The entry showed a reduction of $134,108.54 in                            
            the amount of debt Mr. Lechner owed Stainless for “corporate                               
            legal fees paid personally” for the corporate fiscal year ended                            
            September 30, 1994.  The $134,108.54 debt reduction included                               

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