Sam Kong Fashions, Inc. - Page 5

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          Mr. Wen’s shares of stock.  Sam Kong Fashions paid Mr. Wen                  
          $50,000 for his 50 shares of stock.  From April 1994 to December            
          1995, Mr. Kong was the sole shareholder of Sam Kong Fashions.               
               During the taxable years in issue, Sam Kong Fashions engaged           
          in the business of sewing garments as a subcontractor for other             
          companies in the garment business.4  It performed sewing services           
          for Style Setter Fashions, Inc. (Style Setter), Half Moon Bay,              
          Inc. (Half Moon Bay), and East West Manufacturing, Inc. (East               
          West).  Sam Kong Fashions delivered the completed garments to the           
          contractors, and the contractors paid Sam Kong Fashions per                 
          completed garment.  Mr. Kong provided hangers and bags to the               
          contractors as an accommodation; the contractors paid for the               
          bags and hangers in addition to the per garment fee.  At least              
          one contractor created different invoices and issued separate               
          checks for the hangers and bags.                                            
              During 1994, Style Setter issued 48 checks to “Sam Kong”,              
          which totaled $592,370.50.5  Sam Kong Fashions deposited only 16            
          of these checks into its business checking account maintained at            




               4 Generally, Sam Kong Fashions assembled garments using cut            
          pieces supplied by the contractors.                                         
               5 On the basis of the evidence presented, we calculate that            
          these 48 checks total $592,550.50.  Because respondent requests             
          that we find that the 1994 Setter Style checks issued to Mr. Kong           
          total $592,370.50, we shall use respondent’s figure.                        





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