Mark N. Wright and Erica Y. Wright - Page 24

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          is noteworthy that no such liability was reflected on Wright &              
          Associates’ books and tax return.21  Nor was any liability                  
          attributable to Ms. Mohr’s claim properly deductible for 1999 by            
          the corporation, or by petitioners, under either the cash or                
          accrual method of accounting.  Under the cash method, no                    
          deduction should have been recognized until an amount was paid to           
          Ms. Mohr.  In 1999, no payment by Wright & Associates or Mr.                
          Wright was made to Ms. Mohr.                                                
               Under the accrual method, the all events test for                      
          liabilities was not satisfied in 1999 for Ms. Mohr’s claim                  
          against Mr. Wright, and there was never a claim against Wright &            
          Associates.  Ms. Mohr did not make a demand for the return of her           
          invested funds from Mr. Wright until January of 2000, did not               
          file a formal claim with NASD until May 2000, and did not have a            
          fixed legal right to the return of her invested funds until the             
          dispute was resolved in 2002.                                               
               Mr. Wright seeks in the alternative to justify the $50,000             
          deduction for 1999 as an accrued liability of his own, for which            
          he allegedly made a reserve.  Mr. Wright was not entitled to                

               21On Wright & Associates’ 1999 Form 1120S, $50,000 was                 
          improperly included in the $53,485 return and allowance amount              
          listed on line 1(b), which was subtracted from gross receipts or            
          sales on line 1(a).  The notice of deficiency disallowed $50,000,           
          reducing the return and allowance amount to $3,485 and                      
          eliminating the $50,000 alleged loan from Mr. Wright shown on               
          Wright & Associates’ books.                                                 

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