Joseph A. and Sari F. Deihl - Page 1

                                 T.C. Memo. 2005-287                                  


                               UNITED STATES TAX COURT                                


                     JOSEPH A. AND SARI F. DEIHL, Petitioners v.                      
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      


               Docket Nos. 11136-02, 16293-02,    Filed December 15, 2005.            
                           1024-03.                                                   

                    During 1996, 1997, and 1998, Ps operated a                        
               multilevel marketing enterprise through two related S                  
               corporations, M and K.                                                 
                    Held:  Ps are entitled to deductions claimed                      
               through and in connection with expenditures of M and K                 
               as redetermined herein for 1996, 1997, and 1998.                       
                    Held, further, Ps are not entitled to include in                  
               cost of goods sold for M an amount claimed for                         
               purchases in 1998.                                                     
                    Held, further, Ps are not entitled to a reduction                 
               in adjusted gross income of $550,000 for 1996.                         
                    Held, further, Ps are liable for accuracy-related                 
               penalties pursuant to sec. 6662, I.R.C., for 1996,                     
               1997, and 1998.                                                        







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