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After concessions,1 the issues for decision are (1) whether
petitioners underreported their income for 1995 from their
business reported on Schedule C, Profit or Loss From Business,
and (2) whether petitioners are liable for self-employment tax on
the net profit of the Schedule C business.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulation of facts, first supplemental stipulation of
facts, and the attached exhibits are incorporated herein by this
reference. At the time they filed their petition, Marie Key and
David Glen Key resided in California.
Multilevel Marketing Business
In early 1995, until approximately April 1995, Mr. Key sold
self-help motivational tapes for a multilevel marketing business
called Commonwealth. After being terminated from Commonwealth in
April or May 1995, Mr. Key started his own multilevel marketing
business, modeled after Commonwealth, called The Winning Edge.
Mr. Key later changed the business’ name to The Ultimate
Comeback. Marie Key did administrative work for The Ultimate
Comeback.
The Ultimate Comeback marketed and sold a product called
“The Credit Maze Program” (the Credit Maze). The Credit Maze was
1 Respondent concedes that petitioners are not liable for
$203,440 of the $545,715 of additional Schedule C business income
determined in the statutory notice of deficiency.
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