Thai V. Pham and Khuy T. Bui - Page 5

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          each son, petitioners prepared a Form 1099-MISC, Statement for              
          Recipients of Miscellaneous Income, with respect to each of the             
          above amounts for both taxable years.  In preparing the Forms               
          1099-MISC for each son, petitioners derived the amount presented            
          on the Forms 1099-MISC from data maintained by the recipient son.           
          All records maintained by the four sons were discarded, either              
          after receiving cash payment or after the son provided petitioner           
          Bui with the figures used in preparing the Forms 1099-MISC.                 
               Each of petitioners' four sons filed Federal income tax                
          returns for taxable years 1988 and 1989, reporting the amounts              
          identified above.  For both the 1988 and 1989 taxable years, each           
          son had a net tax due and owing upon completion of his return.              
          Petitioner Bui paid the entire tax due for both taxable years               
          1988 and 1989 for each of her sons, excluding Tri Minh Pham.                
               Citing the lack of substantiation, respondent disallowed               
          petitioners' claimed Schedule C deductions for the cost of labor            
          attributable to payments petitioners made to their sons in                  
          taxable years 1988 and 1989.                                                
               On their Schedule C for taxable year 1988, petitioners also            
          claimed an equipment rental expense deduction in the amount of              
          $7,200.  This expense is attributable to rental payments for six            
          sewing machines that petitioners used in the operation of their             
          enterprise.  Petitioners produced a photocopy of a lease                    
          representing their agreement with the lessor of the machines.               
          This photocopy states the following:                                        

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