EXPLANATION OF ADJUSTMENTS (Form 4549)

Line 1a: Meals: meal expenses in the amount of $10,612 (total amount) were not properly documented in accordance with Sec. 274(d).

Line 1b: Office supplies: Items in the total amount of $11,367 (2 desks) were expensed improperly. These items should be capitalized and depreciated.

Line 1c: Depreciation of capitalized office supplies: Take $1,624 depreciation deduction for office supplies improperly capitalized; Sec. 179 deduction for Medical Equipment in the amount of $50,000 is disallowedthe medical equipment was at the office site December 27, 2019, but was not placed in service until January 7, 2020.

Line 1d: Dr. Grant Sullivan received compensation in amount of $645,000. We find that amount to be excessive. Market averages are $395,000. Therefore, we disallow $250,000 and recharacterize it as a constructive dividend.

Recalculate the amount of penalty and interest and discuss whether you agree with the amounts on the Form 4549. The IRS agent also assessed a preparer penalty against you as the preparer of the return. Is this proper? If not, explain the basis for your argument against it. If you agree with the penalty, what could you have done differently to avoid the penalty?