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and “Tax Meeting”). Petitioners also produced an “Office
Expense” chart listing monthly totals for their office expenses
such as home mortgage, electricity, telephone, heat, property
taxes, termite treatment, child care, computer program, and
C.P.A. fees for 1996.
In 1997, petitioners had approximately 30 downline
distributors in their distribution chain. Petitioners realized
in 1996 that their activity was not as profitable as they had
hoped, and petitioners alleged that they changed their marketing
approach--that is, how they approached the activity and how they
contacted people. They ended their Amway activity sometime in
the year 2000.
Petitioners filed their 1996 and 1997 Federal income tax
returns as married filing jointly. They reported gross income
from wages in the amount of $66,966 in 1996 and $68,399 in 1997.
Petitioners reported income and claimed expenses on Schedules C,
Profit or Loss From Business, with respect to their Amway
activity as follows:
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