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these expenses consistently references the personal residences of
petitioners and their two sons. Also included in the list of
Flair Enterprises’ expenditures for 2002 are numerous checks
payable to petitioners’ sons to reimburse them for expenses
related to their homes. Additional expenses in 2002 related to
the improvement of the 80-acre tract and the construction of the
personal residences of petitioners’ family were deducted as
repair expenses by Flair Enterprises. The utility costs for
petitioners’ home were deducted by the company as well. Flair
Enterprises purchased a Harley Davidson motorcycle at a cost of
$19,000 in 2002 and added the motorcycle to its depreciation
schedule. Repairs to the motorcycle that year were deducted by
Flair Enterprises as business promotion expenses.
During the years in issue, Flair Body Works had an American
Express charge account that was used by several members of
petitioners’ family, and the statements were broken down by the
family member making the respective charges. The American
Express card was used for personal travel and meals, including
several trips to Las Vegas, Nevada. The use of the American
Express card increased about the time that the check cashing
practice of petitioners stopped. Although substantiation for
these expenses was requested by the Internal Revenue Service
(IRS) during the audit of Flair Enterprises, no documentation was
provided by petitioners for most of the expenditures.
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Last modified: November 10, 2007