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For the years in issue, petitioners claimed “car expenses”
for a 1993 Oldsmobile and/or a 1994 BMW 535i based on claimed
“business” miles driven. Petitioners reported “business” miles,
commuting miles, and other mileage on Schedule C of their tax
returns for the years in issue as follows:
1994 1995 1996
“Business” miles 23,398 38,277 29,945
Commuting 4,320 3,000 3,000
Other 2,603 2,456 4,957
Total 30,321 43,733 37,902
Petitioners claimed deductions for the cost of attending
Amway conventions and seminars on a regular basis in cities such
as New York, Denver, Atlanta, Orlando, and Minneapolis.
At the time that petitioners were recruited as Amway
distributors in mid-1991, they had no prior experience with the
Amway-type of activity. Since that time, they have relied only
on advice from one of their “upline” distributors and other
interested Amway individuals.
Other than accepting the Amway “6-4-2 plan”, petitioners did
not maintain a written business plan for their Amway activity,
nor did they maintain a written budget for the activity.
Petitioners did not prepare a break-even analysis for their Amway
activity, nor did they maintain a monthly report of expenses
incurred in pursuing the activity.
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