- 4 - Amway regarding their downliners. These reports summarized order activity and bonus information. Petitioners maintained a contemporaneous diary of meeting activities, but they did not maintain periodic financial statements for the distributorship. During 1996, petitioners constructed a building on their residential property, a “pole barn”, which for a short period of time was used in part for storage of Amway products. However, at some point during the years in issue, petitioners no longer needed to store products, and the building subsequently was used for entirely unrelated purposes. On average, petitioners devoted approximately 2 nights per week, and approximately 2 weekends per month, to the Amway activity. Petitioners’ taxable wage and salary income was as follows for each respective year: 1992 1993 1994 1995 1996 1997 $61,137 $65,980 $64,018 $65,500 $67,000 $72,403 Petitioners reported the following Amway-related gross income and net losses on their joint Federal income tax returns for taxable years 1992 through 1997: 1992 1993 1994 1995 1996 1997 Gross income $18,768 $11,968 $2,972 $2,888 $3,500 $10,431 Net loss (9,559) (25,724) (18,056) (18,392) (19,395) (12,349) In the notice of deficiency, which relates only to taxable years 1996 and 1997, respondent determined that the income petitioners received from their Amway activity was not earned in connection with an activity conducted for profit. Thus, respondent determined that petitioners were required to report the Amway-Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
Last modified: May 25, 2011