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indicated, all section references are to the Internal Revenue
Code in effect for the year in issue.
FINDINGS OF FACT
Some of the facts have been stipulated, and the stipulated
facts are incorporated in our findings by this reference.
Petitioner is a corporation located in Amesbury, Massachusetts,
at the time that its petition was filed.
Petitioner was in the business of designing, storing, and
refurbishing trade show exhibits. Petitioner began its business
in mid-September 1993. Tamara C. Olbres (Olbres) was the
100-percent shareholder and president of petitioner.
In 1994, petitioner was a C corporation. Petitioner used
the accrual method of accounting. On its Form 1120, U.S.
Corporation Income Tax Return, for 1994, petitioner claimed a
deduction for professional fees in the amount of $66,865. The
amount deducted was based in part on an adjusting entry to accrue
a professional fee in the amount of $65,000. The Form 1120
reported compensation paid to Olbres in the amount of $42,000,
salary and wages expense of $6,723, and taxable income of
$75,689. Petitioner’s Form 1120 was prepared and signed by
George Coupounas (Coupounas), who represented himself to be a
knowledgeable certified public accountant and attorney.
An audit of petitioner’s Federal income tax return for 1994
was commenced in early 1997, and an inquiry was made into the
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