- 4 -
1999, RAF did not declare or authorize a dividend for any
shareholders. In February 2002, RAF was sold by its
shareholders.
A. RAF’s 1999 Return and Audit
RAF filed Form 1120, U.S. Corporation Income Tax Return, for
1999. RAF reported that it did not declare a dividend in 1999.
Among its deductions on the 1999 return, RAF listed $654,318 as
“Sales Expense” (the sales expense deduction). RAF also reported
that it had loans from its shareholders of $535,544 at the end of
1999 and interest expense totaling $157,125 during 1999.
In April 2002, respondent commenced an audit of RAF’s 1999
return. During the audit, respondent’s agent requested that RAF
provide
Any and all records relating to the “Sales Expense” in
the amount of $654,318.00 claimed for the period ended
December 31, 1999. The records may include but are not
limited to cancelled checks, invoices, receipts, bank
and credit card statements, workpapers, and internal
vouchers, statements or claims.
In response, RAF provided records relating to an American Express
corporate credit card (corporate card) issued in RAF’s name. The
records showed descriptions of each item charged, a miniature
copy of each charge slip, the date and amount of each purchase,
the vendor, and the individual who made each purchase. No other
documentation was provided with respect to the charges made on
the corporate card. RAF also provided documentation prepared by
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Next
Last modified: May 25, 2011