In this issue
Here's a pop quiz: Closely held companies are run for profit:
( )Yes ( )No ( )It depends.
"Look at the way this is made, John." Eulan McSwain is standing in the prefabricated shed where he and his son, Mike, and their staff of four make furniture. Eulan, a short, ruddy man with bright, deep-set blue eyes, is showing an apprentice, John Nelson, a sample joint from a piece of manufactured furniture. "Notice the less permanent way these two pieces of wood were joined at the corner with a doweled joint," he says. Eulan prefers a hand-dovetailed joint in which two boards interlock to give a more durable connection.
When Irving Perlman, owner of Louis Perlman & Sons, died in October 1988, a local newspaper in western Massachusetts ran a story entitled, "The demise of the Perlman firm: All the Perlman men are dead."
Only a fraction of all businessesare audited each year. Some day, the tax man may come calling. But why call attention to yourself? There are ways to lower the odds that your business will be on the auditor's itinerary.
While IRS auditors do not reveal the exact guidelines they use in selecting returns, accountants have deduced certain general tendencies. Agents appear to focus on returns that seem most likely to produce additional taxes. More complicated returns are more likely to attract attention.