- 10 -
1994-343; Rowell v. Commissioner, T.C. Memo. 1988-410, affd. 884
F.2d 1085 (8th Cir. 1989).
To determine gross receipts, respondent used information
contained in The Ultimate Comeback’s orientation guide and
membership lists. Respondent determined how many units Mr. Key
handled (i.e., transactions for which Mr. Key was the broker).
Respondent multiplied the units by the full amount listed in the
orientation guide as the cost of each unit (i.e., $1,250 for
phase I, $6,250 for phase II, $31,250 for phase III, and $625 for
Wealth Preservation). Respondent then added the administrative
fees charged for each phase and Wealth Preservation.
On brief, respondent notes that he modified this analysis to
account for testimony received at trial from witnesses who
testified they paid less than the value listed in the orientation
guide. Using this methodology, respondent computed petitioners'
total gross receipts to be $868,400. Petitioners reported
$495,000 of gross receipts on their Schedule C. Thus, respondent
calculated a $373,400 understatement of income.
We conclude that this analysis is flawed in two respects.
The first flaw in respondent’s analysis is that respondent
attributed 100 percent of the payments for each phase and Wealth
Preservation to Mr. Key. According to the orientation guide, the
broker on a transaction for phase I, II, and III received only 90
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011