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FINDINGS OF FACT
Some of the facts have been stipulated and are found
accordingly. The stipulation of facts and the attached exhibits
are incorporated herein. At the time the petition was filed,
petitioners resided in Arlington, Texas. Petitioners timely
filed joint Federal income tax returns for taxable years 1988 and
1989.
During the years at issue, petitioners operated a sewing
business out of their residence. Petitioner Khuy T. Bui
(hereinafter petitioner Bui) solicited contracts from various
clothing manufacturers to assemble clothing. Upon entering into
a contract with a clothing manufacturer, the manufacturer
provided petitioner Bui with the precut material and buttons to
be assembled. The manufacturer also provided petitioner Bui with
a fully assembled model of the finished product. This sample was
used to guide the assembly process.
After receiving the precut material, petitioner Bui
proceeded to subcontract the assembly process to various home
sewers. The assembly process consisted of sewing together
multiple pieces of precut material in accordance with
specifications provided by the manufacturer. Upon completing
their subcontracts, the home sewers returned the assembled
garments to petitioner Bui. Petitioners and their four sons then
performed the finishing work. Finishing work consisted of
attaching buttons, cutting button holes, hemming, trimming
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