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Murdock has at all times also served as petitioner’s
president. During 1995, 1996, and 1997, Murdock performed the
following services for petitioner: (1) Solicited business on
behalf of petitioner; (2) ordered petitioner’s supplies;
(3) entered into verbal and/or written agreements on behalf of
petitioner; (4) oversaw the finances of petitioner; (5) collected
moneys owed petitioner; (6) managed petitioner; (7) obtained
clients for petitioner; (8) hired and fired independent
contractors on behalf of petitioner; (9) maintained customer
satisfaction; and (10) supervised all work done on behalf of
petitioner. No other person performed any services on behalf of
petitioner.
During 1995, 1996, and 1997, petitioner did not make regular
payments to Murdock for his services. Rather, Murdock obtained
funds from petitioner as his needs arose. There were no set
intervals at which Murdock would take these moneys from
petitioner. Petitioner neither classified any payment as a
dividend nor distributed any dividends to shareholders from 1995
through 1997.
Petitioner’s Tax Reporting
Petitioner timely filed Forms 1120S, U.S. Income Tax Return
for an S Corporation, and related schedules, for the 1987 through
1994 taxable years. On these returns, petitioner did not report
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