Kenneth J. Nissley and Terri C. Connor Nissley - Page 10

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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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