U.R. Neely - Page 4




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          Activities of the Company During 1992                                       
               The company experienced a busy year in 1992.  Petitioner had           
          approximately 100 jobs, with each job lasting anywhere from 6               
          weeks to 6 months.  While petitioner typically maintained a                 
          workforce of approximately 20 to 25 people, during 1992 that                
          figure increased to 40.  Most of the employees served in the                
          field as installers.  Petitioner, a superintendent, an estimator,           
          and an office manager operated out of the business office.                  
               At some point in 1992, Robert Cook approached petitioner               
          about working at one of his job sites.  Mr. Cook, however,                  
          conditioned his services upon being paid in cash.  Due to his               
          need for labor, petitioner agreed, but only after informing Mr.             
          Cook that he would be issued a Form 1099 with respect to the cash           
          payments made to him.                                                       
               William Baker and Dennis Page were hired by petitioner under           
          similar circumstances.  Petitioner did not meet with these                  
          individuals; rather, he hired them on the recommendation of his             
          job foremen.  Mr. Baker and Mr. Page each insisted on being paid            
          in cash for their services, a condition to which petitioner again           
          agreed on the understanding that Forms 1099 would be issued with            
          regard to the payments.                                                     
               Petitioner’s arrangements with Messrs. Cook, Baker, and Page           
          (collectively, the workers) constitute the only instance in which           
          petitioner paid a worker in cash for services rendered.   During            






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