- 5 - providing management services to the four affiliates, plus a markup percentage in the 3-percent range. AJCS was entitled to receive the management fees at the time the affiliates completed the contracts. All four affiliates used the completed contract method to report income for Federal tax purposes. For the affiliates’ tax years ending in 1993, they reported gross income as follows: Affiliate TYE Gross Income West Sept. 30, 1993 $2,394,029 Georgia Sept. 30, 1993 5,962,994 Central June 30, 1993 -0- East Mar. 31, 1993 76,116 Georgia deducted $490,000 as management fees paid to AJCS on its September 30, 1993, tax return. Central deducted $724,880 as management fees paid to AJCS on its June 30, 1994, tax return. AJCS did not report any management fee income on its 1993 tax return. The four affiliates extended loans to AJCS during the 1993 calendar year. As of the end of the 1993 tax year, the affiliates had outstanding loans to AJCS as follows: Affiliate Loan Amount West -0- Georgia $1,674,722 Central 568,065 East 80,201 AJCS reported taxable income of $117,018, $358,860, and $309,967 for the 1990, 1991, and 1992 tax years, respectively. AJCS’s and the four affiliates’ “schedule of contracts” for thePage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Next
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