William C. and Dorothy M. Smith - Page 10




                                       - 10 -                                         
          member of Mrs. Smith’s Renaissance team was her friend Walt                 
          Holcomb.  Mrs. Smith lent Mr. Holcomb $12,000 in the same year              
          that he purchased the Tax Relief System.                                    
               Overall, Mrs. Smith’s direct marketing activities have                 
          proved unsuccessful.  On the Schedules C of their joint Federal             
          income tax returns for 2000, 2001, and 2002, petitioners reported           
          gross receipts of $19,869, $16,014, and $46,587, respectively,              
          related to Mrs. Smith’s direct marketing activities.  For the               
          same years, petitioners reported total losses of $26,856,                   
          $34,155, and $17,256, respectively.  These losses included the              
          reported use of 40.48 percent of their residence for regular and            
          exclusive business activity.  The 2002 loss included wages                  
          totaling $14,060 paid to petitioners’ two sons.                             
               In subsequent years, petitioners’ gross receipts from the              
          activities rose to $54,793 in 2003 before falling to $18,294 in             
          2004 and $17,947 in 2005.  In 2003, petitioners reported that               
          Mrs. Smith’s activities broke even.  In 2004, petitioners                   
          discontinued claiming deductions for the business use of their              
          residence, car and truck expenses, and supplies and reported a              
          profit of $758.  In 2005, petitioners also stopped claiming a               
          deduction for wages paid to their sons and reported a profit of             
          $7,354.  Mrs. Smith testified that these expenses could no longer           
          be justified as deductions because the nature of Mrs. Smith’s               








Page:  Previous  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  Next 

Last modified: November 10, 2007