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schedule over the previous 3 to 4 years. Because of his past
experience in the insurance industry, Mr. Keeley decided to
become a self-employed insurance broker. In September 1996, Mr.
Keeley began to work on a commission basis as an insurance broker
with New York Life Insurance Co. (New York Life). By mid-1997,
Mr. Keeley stopped working as an insurance broker because he
failed to meet New York Life’s application approval rate.
Around this time, Mr. Keeley suffered a mental breakdown as
a result of “not being able to support the family, having what I
felt was a good situation turn into what was a very bad situation
at that point in time, that being the self-employment
opportunity”. In addition, Mrs. Keeley thought that Mr. Keeley’s
depression “robbed him of the confidence to do his job
successfully” such that “by March [of 1997], he could not
function on the job at all” and that “during the summer and early
autumn, he spent a good part of the day in bed”. Thus, Mr.
Keeley became unemployed for several months, except for small
jobs, e.g., delivering newspapers and collecting donations.
As a result of petitioners’ financial hardship,4 Mr. Keeley
withdrew funds in 1997 from his individual retirement account
4 Mr. Keeley testified that in 1997 his income declined to
$3,000. We note, however, that on their 1997 return, petitioners
reported gross wages of $15,705 ($3,115 of which was earned by
Mr. Keeley), and on a Schedule C, Profit or Loss From Business,
attached to their return, Mr. Keeley reported gross receipts of
$13,140 and a net profit of $4,766.
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