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year ending May 31, 1996 (FYE 1996), $527,216; and (3) for the
tax year ending May 31, 1997 (FYE 1997), $718,914.
After concessions,2 the issue for decision is whether
respondent abused his discretion by requiring petitioner to
change its method of accounting from the cash receipts and
disbursements method of accounting (cash method) to the accrual
method of accounting (accrual method). Subsumed in this issue is
the question of whether petitioner is required to maintain
inventories for tax purposes.
Background
The parties submitted this case fully stipulated pursuant to
Rule 122. The stipulation of facts and the attached exhibits are
incorporated herein by this reference. At the time the petition
was filed, petitioner’s principal place of business was in Winn,
Maine.
Herbert C. Haynes, Inc.
Petitioner is a closely held Maine corporation engaged in
the logging business. Petitioner was incorporated in 1963.
Before incorporation, Herbert C. Haynes, Sr. operated the logging
business as a sole proprietorship. Herbert C. Haynes, Sr.,
president and founder of petitioner, is the majority shareholder
of petitioner. He owned between 97 and 89 percent of the stock
2 The parties filed a stipulation of settled issues
resolving all other issues.
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