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Dominique and Jonathan were Mr. Black’s employees and the
payments to them were properly deducted as salary.
The record establishes that Dominique and Jonathan did spend
some time in Mr. Black’s office in Charlotte. Likewise, Ms.
Roberts, an employee of Mr. Black, told Agent O’Dell that the
children sometimes helped her “stuff and stamp” envelopes and
perform other chores like emptying the trash. However, we are
not persuaded that amounts paid to petitioners’ children were
compensation for services rendered.
Petitioners failed to present any records to substantiate
that he employed Dominique and Jonathan throughout 1991 and 1992,
and admitted that they kept no written records of the hours they
worked. When asked at trial to estimate the total hours each
child worked, Mr. Black answered: “let’s call it 1,000 hours per
year.” According to his estimate, Mr. Black’s children, who were
6 and 8 years old in 1991, worked the same hours as one full-time
adult.
Mr. Black did not pay the children for services rendered.
His actual employee, Ms. Roberts, received a set annual salary,
plus a bonus, and was paid by check twice per month. Mr. Black
properly withheld Social Security and income taxes from her pay,
and issued a Form W-2 reporting her wages. No Forms W-4,
Employees Withholding Allowance Certificate, were ever executed
for Dominique and Jonathan, no Social Security or income taxes
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Last modified: March 27, 2008