- 10 -
As a percentage, petitioner estimates the direct costs associated
with the various business activities as follows:
Business Activity FYE 1995 FYE 1996 FYE 1997
Trees from petitioner’s land 17% 18% 12%
Trees from related party land 34 36 31
Trees from unrelated party land 17 18 18
Subtotal 68 73 61
Purchased wood 32 27 39
Total 100 100 100
Financial Accounting
The firm of Haverlock, Estey & Curran prepared petitioner’s
financial statements for FYE 1995, FYE 1996, and FYE 1997. The
financial statements note, in the first footnote, that “The
company * * * is on the cash basis of accounting for financial
statement and tax reporting. Consequently, accounts payable,
receivable and inventory are not recognized in these statements.
The estimated figures for each * * * are as follows:”
FYE 1995 FYE 1996 FYE 1997
Accounts receivable $1,576,000$3,200,000 $3,500,000
Accounts payable --— --— ---
Inventory1 (cost, FIFO) 1,862,8921,477,361 1,862,892
1 The parties agree that if respondent prevails and petitioner is
required to maintain inventories, the closing inventory figures
are as follows: (1) For FYE 1995, $1,862,892; (2) for FYE 1996,
$610,950; and (3) for FYE 1997, $587,334.
Income Tax Returns
On petitioner’s Forms 1120, U.S. Corporation Income Tax
Return, for the years at issue, petitioner listed its business
activity as “wood operator” and its product or service as
“pulpwood and logs”. Since its inception, and including the
years at issue, petitioner has maintained its books and records
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011