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$50,068 attributable to PK Ventures and TPTC appears on the
Roses’ joint income tax return for 1990 as wages received. Rose
did, however, report $33,068 of imputed interest from PK Ventures
on that return as well as $17,000 of gross income from his
involvement in an “investment company” on a Schedule C, Profit or
Loss From Business, that was attached to the return.
On its consolidated income tax return for 1991, PKV&S
claimed a $103,000 deduction for officer compensation paid to
Rose. PKV&S reported that $30,000 of this amount was paid by
TBPC, that $30,000 was paid by TPTC, and that the balance was
paid by PK Ventures. In addition, PKV&S claimed a $37,469
deduction for other salaries and wages paid to Rose. This latter
deduction was attributable to the “reclassification” of an
account showing that Rose owed PK Ventures $437,469 as of
December 31, 1991. As discussed above, this “reclassification”
resulted in PKV&S’s claiming a $400,000 bad debt deduction as
well as the $37,469 deduction for other salaries and wages paid
to Rose. The Roses reported the $103,000 of officer compensation
on their joint income tax return for 1991, but they failed to
report the $37,469 of other salaries and wages.
On its consolidated income tax return for 1992, PKV&S
claimed a $1,646,948 deduction for officer compensation paid to
Rose. PKV&S reported that $32,500 of this amount was paid by
TBPC, that $32,500 was paid by TPTC, and that the balance was
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