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Ms. Posthumus did not keep track of the interest rates applicable
to the loans that petitioner made, and she was not personally
aware whether anyone for petitioner sent periodic statements to
the debtor companies that he lent money. Petitioner did not keep
or maintain records reflecting the accrued interest that WMG owed
him.
Petitioner hired McGladrey and Pullen, L.L.P., to do his
personal and business accounting and to prepare his tax returns
beginning in the 1980s through 1992. Petitioner’s tax returns
were prepared from the schedules prepared by Ms. Posthumus.
McGladrey and Pullen also did accounting work for WMG, and it
prepared amortization schedules and maintained records for the
accrued interest WMG owed petitioner.
An employee of McGladrey and Pullen, James Estes, a C.P.A.,
assisted petitioner in his tax return preparation and planning.
Petitioner met with Mr. Estes in December 1990 to discuss his
income and deductions for 1990. Among the items discussed were
petitioner’s loans to WMG which he at that time did not
anticipate as being collectible, and the impact the loans would
have on his taxes. A memorandum prepared by Mr. Estes from that
meeting states: “It is desired to claim a loss with respect to
the uncollectible notes in 1990. In addition it is desired to
claim the loss as an ordinary loss.”
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