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1. Petitioners’ Amway Distributorship Was Not an Activity
Engaged in for Profit During 1996 and 1997
Petitioners filed Schedules C, Profit and Loss From
Business, with their 1996 and 1997 Federal income tax returns and
reported the following:
Income 1996 1997
Gross receipts $150 $84.63
Less: cost of goods sold -0- -0-
Gross income 150 84.63
Expenses
Car and truck $8,866 $12,119
Commission and fees 28 -0-
Legal and professional services 300 300
Travel 45 380
Meals and entertainment 305 437
Other expenses1 2,358 2,545.39
Total expenses 11,902 15,781.39
Total net losses (11,752) (15,696.76)
1The “Other expenses” claimed for 1996 were:
Monthly seminars (11 seminars at $28 each) $308
Quarterly conferences (3 conferences at
$130 each, plus food and lodging) 840
Tapes, catalogs, business support 850
Cell phone (basic) 360
The “Other expenses” claimed for 1997 were:
Monthly training seminars (tickets) $308
Quarterly conferences (3) 470
Training tapes and business support 1,767.39
In the notices of deficiency for 1996 and 1997, respondent
determined that petitioners’ Amway activity did not satisfy
requirements for carrying on a business, and that the expenses
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Last modified: May 25, 2011