Understanding Return for company purchase. I am looking a purchasing a business and review the tax returns for the last two years. Something I don't understand maybe or unless I do and they are hiding income. Here is the example. This is a resort with cabin rentals. I have there cabin rentals for 2014 and calculate they have $86K in income from rentals in 2014. Their tax return for 2014 has $91k in gross receipts. Then they deduct $23k from gross receipts for cost of goods sold. Which doesn't add up to me because with the difference of the known cabin rental($86K) and gross receipts($91K) is only ($5k). They spent $23K to make $5k which is a loss of $18k. This is similar for the last 2 years and the ending inventory is the same amount for both. What is going on? |