Paul E. Hathaway and Brenda J. Hathaway - Page 10

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               Hathaway incurred the cost of going to 22 apparel shows per            
          year, where he displayed TAG merchandise and solicited orders.              
          These apparel shows cost Hathaway between $250-$600 per show for            
          showroom rental fees and promoters' fees.  Hathaway’s total                 
          costs, including hiring assistants to help set up displays, may             
          have run to $2,000 for some shows.  Hathaway also paid $75 per              
          year to be a member of the Bureau of Wholesale Sales                        
          Representatives.  Membership in this organization was required in           
          order to participate in certain apparel shows.                              
               TAG's sales representatives also incurred the cost of hiring           
          people to assist them in their sales activities.  During the                
          years in issue, Hathaway employed order writers and people to               
          assist him at apparel shows.  TAG knew that their sales                     
          representatives hired assistants and encouraged their sales                 
          representatives to do so; however, TAG did not screen assistants            
          hired by their sales representatives.                                       
               Hathaway spent a total of $84,763 and $84,847 for these                
          business expenses in 1989 and 1990, respectively.                           
               In addition to the above expenses, Hathaway bought sales               
          materials and equipment from TAG.  TAG then deducted the costs of           
          those items from the commissions that TAG paid to Hathaway on a             
          semiannual basis, and TAG issued to Hathaway Forms 1099 in the              
          amounts of these costs.  The following table lists the costs of             
          items Hathaway bought from TAG in 1989 and 1990.                            

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Last modified: May 25, 2011