Marcus V. and Polly A. Booker - Page 14

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               With respect to petitioners’ deductions for wages,                     
          respondent, as shown above, conceded the entire amount                      
          petitioners claimed on their 1999 tax return and $9,415 of the              
          $14,215 claimed by petitioners on their 2000 tax return.                    
          Petitioners claimed at trial that they were entitled to deduct an           
          additional $4,525 for wages not claimed on their 1999 tax return            
          and the remaining $4,800 wage expense claimed on their 2000 tax             
          return that was not conceded by respondent.                                 
               Mr. Booker claims that he employed several people to pass              
          out brochures promoting his tax return preparation business.                
          Also, he claims he paid his workers an incentive bonus for every            
          referral that resulted in additional business.  The amount of the           
          bonus depended on the type of tax return the client needed                  
          prepared.  A “long-form” return earned the worker a larger bonus            
          than a “short form” return, and so on.  Petitioners paid all of             
          the workers in cash and kept no records of the payments; however,           
          at the end of each taxable year, Mr. Booker claims he issued a              
          Form 1099, Miscellaneous Income, to each person and filed a Form            
          1096, Annual Summary and Transmittal of U.S. Information Returns,           
          with the Social Security Administration.                                    
               The additional wage deduction for 1999 and the remaining               
          wage deduction for 2000 claimed by petitioners consist of amounts           
          paid to one worker, Roy C. Bell.6  Mr. Booker testified that Mr.            

               6Mr. Booker testified at trial that the $13,300 claimed as a           
          wage expense on petitioners’ 1999 tax return included the $4,000            
          he allegedly paid Mr. Bell during 1999.  The $4,525 he claimed he           

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