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existence, BMC elected to be treated as an S corporation. BMC
maintained a bank account with Corestates Bank (BMC account), and
petitioner deposited $59,609.62 into this account during 1996.
BMC did not file a 1996 Form 1120S, U.S. Income Tax Return for an
S Corporation, to report the $59,609.62 as gross receipts. The
deposits into the BMC account were not reported as income on
petitioners’ 1996 return or otherwise accounted for by
petitioners.
Nationwide Home Improvement Limited
Petitioner was also the sole shareholder and sole corporate
officer of Nationwide Home Improvement Limited (NHIL) during
1996. NHIL conducted remodeling services and aided customers in
securing financing for improvements. Petitioner filed a
Form 2553, Election by a Small Business Corporation, to change
the status of NHIL from a C corporation to an S corporation
effective as of January 1, 1996. The Internal Revenue Service
(IRS) approved the election in 1995.
During 1996, petitioner provided management services to
NHIL, working about 20 to 30 hours per week. These services
included petitioner’s meeting with clients and conducting sales
for NHIL. NHIL paid $20,680 to petitioner as compensation for
the management services provided. On NHIL’s return, the
preparer, Joseph M. Grey (Grey), treated this amount as
compensation paid to an officer.
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Last modified: May 25, 2011