"david banford" <dban1957[at]aol.com> wrote:

- quote -

Company A is what is also referred to as the "common
paymaster". Expenses PAID by it can be reflected as due
from the sister companies and they may record the liability
as expense. This is based on the third party payment rules.
These rules allow a person or entity to deduct expenses when
paid by bank credit cards (not department store cards) and
other third party transactions such as is in your case.

Mike Lewis, CPA

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I have a few questions on multiple corporations
(Brother-Sister). There are four C-Corporations all on the
cash method of accounting. All have different year ends and
are part of a controlled group. One company, (Company A),
receives the bills for the other three companies for things
like insurance, telephone, etc.

Company A then records the entire expense on its books and
then bills the other companies for their portion.

Question 1 - My concern is that these bills never gets
repaid and that it is hard to track who owes who. Question,
can Company A set up an Accounts Receivable on its books for
the other related companies, even though it on the cash
basis of accounting?

Question 2 - I know the the related party rules relate to
sales and exchanges between controlled groups. Would this
also apply to the expenses that Company A pays for the other
three entities? Meaning that Company A couldn't deduct the
expenses for the other companies on its books.

Thanks for your help. This is a great group.

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