William H. Breucher III - Page 5

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               Early in 1998, the balance in the “Advance - Bruecher, WM.”            
          account grew to more than $191,000.  At that point, Mr.                     
          Bruecher’s accountant reclassified about $114,000 of these                  
          advances as wages paid to Mr. Bruecher and filed an amended Form            
          941, Employer’s Quarterly Federal Tax Return, for the first                 
          quarter of taxable year 1998, reporting said payment.1  Mr.                 
          Bruecher reported the $120,000 as wages on his 1998 Form 1040,              
          U.S. Individual Income Tax Return.  After the reclassification,             
          the “Advance - Bruecher, WM.” account had a balance of about                
               Mr. Bruecher continued to pay his personal expenses from the           
          corporation’s bank account.  Within 9 months of the deemed                  
          payment of wages, the balance in the “Advance - Bruecher, WM.”              
          account increased to $120,325.48.  The following table contains             
          examples of expenses recorded under the “Advance - Bruecher, WM.”           
          account and are taken directly from Bruecher Foundation’s general           
          ledger for the relevant time period:                                        

          1The following table reconciles the decrease in the “Advance                
          - Bruecher, WM.” account and Bruecher Foundation’s deemed payment           
          of wages:                                                                   
                    Decrease in “Advance - Bruecher, WM.”   $114,019.20               
                    Social Security tax (payroll tax)       4,240.80                  
                    Medicare tax (payroll tax)              1,740.00                  
                    Total                                   120,000.00                

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