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fees, office expenses, bar dues, and health insurance premiums
and deducted most of these expenses on its corporate income tax
returns.
Petitioners maintained, at Farmers and Merchants Bank, a
personal line of credit. On the corporate ledgers, Moe listed
checks written to Farmers and Merchants Bank and MBNA in the
“Receivable from Officer” account. These checks had an “LN” memo
description, indicating that the payment related to a loan or the
“Receivable from Officer” account.
From 1982 through 1992, Western sponsored a defined benefit
plan for petitioner, its only participant. In 1982 and 1984,
respectively, Western contributed $46,473 and $81,822 to the
plan. In the early 1980s, petitioners and the pension plan
invested $160,000 (i.e., petitioners invested $70,000 and the
pension plan invested $90,000) in a business venture.
Petitioners and the pension plan later sued the venture’s
promoter and, in 1992, were awarded a $20,852 recovery of their
investment. Petitioners retained the pension plan’s portion of
the recovery (i.e., $11,677).
In 1984, petitioners bought a 1973 Rolls Royce for $27,000.
Petitioners used the Rolls Royce for business promotion in 1984
and 1985. In 1985, the automobile’s engine failed, and, as a
result, petitioners were not able to use the automobile for
approximately 2-1/2 years.
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