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Flair Enterprises also received two checks monthly from B&H
during the years in issue in accordance with a 1999 supply
contract between the company and B&H. One monthly payment by B&H
to Flair Enterprises was an incentive payment of $1,250 in return
for a 5-year commitment of Flair Body Works to continue to
purchase paint products from B&H. The B&H checks were cashed
throughout 2000 and through September 2001, when petitioners’
bank no longer allowed petitioners to cash checks. Throughout
the remainder of 2001 and all of 2002, the incentive payments
from B&H were deposited into the bank account of Flair Racing and
were not recognized as income to Flair Enterprises, which was
contractually entitled to the payments. None of the B&H
incentive payments that were cashed were recognized in the income
of any entity or individual. The B&H incentive payments that
were deposited into the Flair Racing bank account were included
in the income of Flair Racing.
The other monthly check from B&H to Flair Enterprises was a
rebate check for an agreed percentage of the invoiced cost of
Dupont and 3M products purchased from B&H. The rebate checks
varied in amount each month and were based on the volume of
products purchased by Flair Body Works during the previous month.
Although the agreed percentage discount from B&H was guaranteed
to Flair Enterprises and the rebate was a remittance of that
discount to Flair Body Works, the B&H rebate checks were made
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Last modified: November 10, 2007