Interex, Inc. - Page 3

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          accrual of the $65,000 professional fee.  During the audit,                 
          petitioner was represented by Coupounas.  Coupounas stated that             
          the $65,000 was for his services and that he had never billed               
          petitioner and had not been paid for the services.  He declined             
          to provide time sheets reflecting services performed for                    
          petitioner.  In August 1998, Olbres signed a check payable to               
          Coupounas for $65,000.  At the direction of Coupounas, Olbres               
          dated the check December 31, 1998.  The check was delivered to              
          Coupounas in August 1998 and was negotiated by him and cleared              
          petitioner’s bank account in August 1998.  Before delivering the            
          check to Coupounas, Olbres did not receive from Coupounas any               
          invoice or other itemization of the services for which payment              
          was allegedly made.                                                         
               Petitioner argues that the professional fees were incurred             
          during the year in issue.                                                   
               Under the accrual method of accounting, a liability is                 
          incurred, and generally is taken into account for Federal income            
          tax purposes, in the taxable year in which all the events have              
          occurred that establish the fact of the liability, the amount of            
          the liability can be determined with reasonable accuracy, and               
          economic performance has occurred with respect to the liability.            
          Sec. 1.461-1(a)(2), Income Tax Regs.                                        

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