
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: FRIDAY, October 8, 1993                   TAG: 9310080250
SECTION: VIRGINIA                    PAGE: B-4   EDITION: METRO 
SOURCE: DAVID M. POOLE
DATELINE:                                 LENGTH: Short

PARTNERS CLAIMED $40,782 TAX CREDIT

In November 1984, American Chemical Co. was losing money, and its auditors suspected that former President Frank Selbe had written unauthorized checks to himself.

That's when the company owners, who included Del. Richard Cranwell, D-Roanoke County, came up with a way to benefit from the company's misfortunes.

They proposed converting American Chemical to a "Sub Chapter S" corporation, meaning that the owners could treat corporate losses as personal losses.

"That would create a very tidy loss on your tax return," attorney Gerald A. Dechow wrote to Cranwell in a "personal and confidential" letter dated Nov. 2, 1984.

Dechow advised Cranwell to act quickly, because each passing day would reduce the amount of the tax credit. "A delay in this particular instance can be very tragic," he wrote.

Two weeks later, the janitorial supply company filed a Sub Chapter S election form with the Internal Revenue Service listing four shareholders: Cranwell; Carl Flora; and Flora's two sons, Barry and Gary.

The partners later claimed a $163,131 "theft loss" from Selbe, making each of them eligible for a $40,782 credit on their individual 1984 tax returns.

by CNB