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of $12,013 for the cost of threads on its 1995 corporate tax
return.
Petitioners did not offer any documents, such as receipts or
invoices, to substantiate its claimed expense. However,
petitioners rely on the testimony of Mr. Wen to support the
claim. Mr. Wen stated that he was not involved in the management
of the business. While he was employed by Sam Kong Fashions, Mr.
Wen delivered finished products, ironed garments, and performed
handiwork. We are not convinced that Mr. Wen had adequate
knowledge of Sam Kong Fashions’s business operations to
accurately testify about the amount of thread that Mr. Kong
purchased in 1994.
Additionally, representatives of Style Setters and Half Moon
Bay testified that the contractors often provided the thread that
Sam Kong Fashions used to sew the garments.15 Ms. Augustyn and
Mr. Sporidis testified that the contractors provided some thread
to Sam Kong Fashions, particularly at the beginning of their
business relationship. Although the record establishes that Sam
Kong Fashions did purchase thread, the evidence fails to
establish whether Sam Kong Fashions incurred any expenses beyond
15 Ms. Augustyn testified that Style Setters provided thread
to Sam Kong Fashions “Most of the time.” Mr. Sporidis, the
president of Half Moon Bay, testified that Half Moon Bay
initially provided thread to the corporation. Later, Half Moon
Bay stopped providing the corporation with thread because “[Half
Moon Bay] would never get [the thread] back” and “it became a big
cost”.
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