Lee F. Haney, Sr., and Jean C. Haney, a.k.a. Jeanie Haney - Page 21




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               Included among those checks cashed by Mrs. Haney were checks           
          from COPART, which were reimbursements for towing, storage, and             
          expenses incurred with regard to vehicles that were eventually              
          declared totaled by insurance companies and hauled away from                
          Flair Body Works.  These costs reimbursed by COPART had already             
          been included in those deducted by Flair Enterprises on its Forms           
          1120-S for the years in issue.  Because Flair Enterprises failed            
          to take the COPART reimbursements into account either as                    
          reductions in its claimed business expense deductions or as                 
          taxable income, it underreported its net income in the years in             
          issue by the total amount of COPART checks cashed by Mrs. Haney             
          in those years.                                                             
               Also included in the checks cashed by Mrs. Haney during the            
          years in issue were lease reimbursement checks from Hudiburg                
          Chevrolet in appreciation for the high volume of business that              
          Flair Enterprises did with the car dealership.  The monthly lease           
          payments made by Flair Enterprises to Hudiburg Chevrolet were               
          deducted as business expenses of the company, but the lease                 
          reimbursements from Hudiburg Chevrolet back to Flair Enterprises            
          were not included in the income of the company to offset the                
          previously taken lease expense deductions.  Rather than being               
          deposited into Flair Enterprises’ bank account and included in              
          income, the Hudiburg Chevrolet reimbursement checks were cashed             
          by Mrs. Haney and turned over to petitioner.                                







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