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In 1994 and 1995, petitioner received compensation from the
firm in the total amounts of $703,800 and $299,925, respectively,
denominated by the firm as wages and independent contractor fees
as follows:
Petitioner’s Compensation
Year Wages Fee Income Total
1994 $200,000 $503,800 $703,800
1995 200,000 99,925 299,925
In December of 1994, petitioner transferred back to the firm
$129,000 which petitioner in 1994 had received from the firm as
independent contractor fees. Initially, the firm’s bookkeeper
classified the returned $129,000 as a reduction of the firm’s
independent contractor fee expense account. However, in February
of 1995, the law firm’s bookkeeper, for reasons unclear,
reclassified the transfer from petitioner to the law firm of the
$129,000 as a reduction in the firm’s accounts receivable due
from petitioner.
For the law firm’s taxable years ending November 30, 1994
and 1995, litigation costs were advanced by the firm relating to
contingent fee contracts with its clients in the total amounts of
$737,652 and $1,069,275, respectively.
During the years in issue, certain office management tasks
and all bookkeeping tasks of the firm were performed by a third
party bookkeeper hired by petitioner.
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Last modified: May 25, 2011