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received from Strategic did not constitute compensation for
employment or for any employment-related activities, nor were
they repayments of funds or dividends issued with respect to
stock.
Petitioner also claimed expenses of $567.99 on Schedule C
which consisted of $67.35 for Internet access fees, $157.50 for
maintenance dues, $15 for postage, and $328.14 for the startup
kit/initiation fee. As a result, petitioner reported a net
profit of $19,787.
In the notice of deficiency, respondent determined that
petitioner was liable for self-employment tax (and entitled to
the self-employment tax deduction) on $19,787.
Petitioner contends that he is not liable for self-
employment tax since he was not involved in this activity with
continuity and regularity. Petitioner argues that he did not
sell any of Strategic’s product and that he did not recruit any
downline distributors. He claims that Ms. Schaff-Hahn or someone
above her recruited the downline distributors and placed them
below petitioner.
Additionally, petitioner contends that he paid maintenance
fees of roughly $75 per month to maintain his distributorship.
Petitioner authorized Strategic to charge his credit card monthly
in exchange for a “Monthly Collector Series Single IRC”, which
petitioner testified was a collector’s phone card. Petitioner
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Last modified: May 25, 2011