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threads, ironing, folding, pinning, and packaging. Upon
completing the finishing work, petitioner Bui returned the
completed product to the manufacturer.
The manufacturer generally paid petitioner Bui the contract
price within 2 weeks of her delivery of the completed product.
After receiving payment from the manufacturer, petitioner Bui
paid the subcontractors who assembled the garments.
During taxable years 1988 and 1989, three of petitioners'
four sons assisted in performing the finishing work. On their
Federal income tax returns for taxable years 1988 and 1989,
petitioners deducted the following sums with respect to amounts
allegedly paid to their four sons in exchange for their
performance of the finishing work:
1988
Thinh Dat Pham $7,215.80
Dung Tien Pham 8,320.80
Duy Duc Pham 7,420.20
Total 22,956.80
1989
Thinh Dat Pham $6,732.15
Duy Duc Pham 6,917.34
Tri Minh Pham 6,035.30
Total 19,684.79
There was no formal policy governing these payments to
petitioners' sons. All payments to petitioners' four sons were
made in cash and were based on records allegedly maintained by
the recipient son. Petitioners did not maintain records or other
written documentation of the amounts paid to their sons. For
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