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Petitioner’s Accounting and Tax Reporting
Petitioner is an accrual basis taxpayer. For accounting
purposes, petitioner records payments received pursuant to
preneed contracts as liabilities under the designation
prearranged funerals. Petitioner does not recognize as income
payments recorded on its books and records as prearranged
funerals until the tax year in which the goods and services are
provided. Petitioner does recognize interest and dividend income
earned on the investments, exclusive of the BayBank escrow
account, into which the preneed funds are deposited.
Petitioner filed Forms 1120, U.S. Corporation Income Tax
Return, for 1996, 1997, and 1998 consistent with the foregoing
approach. Attached to each return is a Schedule L, Balance
Sheets per Books. These Schedules L reflect as “Other
investments” the following balances in petitioner’s investment
vehicles, including the BayBank escrow account:
Year As of Jan. 1 As of Dec. 31
1996 $2,270,655 $2,431,946
1997 2,431,946 2,515,217
1998 2,515,217 2,503,934
Also on the Schedules L, petitioner included in “Other current
liabilities” the following amounts for prearranged funerals:
Year As of Jan. 1 As of Dec. 31
1996 $1,587,416 $1,612,272
1997 1,612,272 1,614,929
1998 1,614,929 1,543,284
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Last modified: May 25, 2011