Excessive write-offs

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August 30, 2023

by a searcher from University of South Carolina - Darla Moore School of Business in Charleston, SC, USA

In due diligence on a business and finding that the seller has done huge amounts of personal expenses as business expenses. He's bought himself cars, RVs, snow-mobiles, vacations, etc. In total it's about $300K a year.

This deal is a stock sale. My CPA said there is not much to worry about in terms of liability for his write-offs in the event of a future audit, but I'm not convinced. Does anyone else have experience with Sellers who have been way too generous with writing off expenses in that way?

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