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public through BRVC. Petitioner created an internet website to
sell such phone cards online. Additionally, petitioner, through
BRVC, represented various athletes and artists and solicited
corporations to sponsor the athletes or artists in exchange for
endorsements of products or services. An image of the athlete or
artist (or their artwork) was depicted on the face of a prepaid
phone card, which was sold to the general public by BRVC. BRVC
retained a portion of the phone card sales price and received a
portion of any endorsement fee. In some cases, BRVC also
received a percentage of the profits from the sales of artwork by
a sponsored artist. At the time of the trial, petitioner
continued to conduct this prepaid phone card activity through
BRVC and had begun selling the official phone card for USA
Volleyball.
On her Federal income tax return for 1992, petitioner
reported wage income of $54,118 from SOI, taxable interest income
of $2,757, and a taxable State income tax refund of $245.
Petitioner also reported a $3,000 capital loss carryover, a
$1,940 loss from rental real estate, and a $20,106 loss, on
Schedule C, Profit or Loss From Business (Schedule C), from the
operation of BRVC. Thus, petitioner reported total income and
adjusted gross income of $32,074 for 1992. On Schedule C,
petitioner reported zero gross receipts and total expenses of
$20,106, resulting in the $20,106 Schedule C loss.
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