Ron Lykins, Inc. - Page 3

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          easy--in 2000, Lykins Financial’s income came exclusively in the            
          form of commissions on the sale of securities and investment                
          advice; Lykins Inc.’s income came exclusively from fees that it             
          charged for tax preparation and advice.  But the formation of               
          Lykins Financial had led to few physical changes.  The firms                
          shared the same office space, and had the same address, same                
          phone number, same copying machine and fax, same employee manual,           
          and even the same coffee machine.  This all made segregating the            
          two firms’ expenses quite difficult.  The firms also had no                 
          written agreement defining whose employees were whose, and while            
          some employees worked only on financial services and investments            
          and some worked only on tax preparation, there were also some who           
          worked on both.  Further complicating the situation, Lykins Inc.            
          provided overhead services such as reception and payroll to                 
          Lykins Financial.  It also continued to pay all the rent on the             
          shared office space, and all the employees’ wages and payroll               
          taxes.  Lykins credibly testified that he gave up on dividing               
          expenses in a more sophisticated way, and simply allocated them             
          between the two companies based on his own estimate of each                 
          firm’s share of their combined total hours worked.                          
               Lykins Inc. and Lykins Financial did file separate corporate           
          tax returns.  The Commissioner audited Lykins Inc., and issued it           
          a notice of deficiency for 1999 and 2000 after concluding that              
          the firm had become a “qualified personal services corporation”             






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Last modified: May 25, 2011