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Respondent determined deficiencies in petitioners’ Federal
income taxes of $3,976, $3,790, and $5,420 for 1996, 1997, and
1998, respectively. The issue for decision for each year is
whether petitioners are entitled to deductions for expenses
incurred in connection with the sale and distribution of Amway
Corp. (Amway) products. The resolution of this issue for each
year depends upon whether petitioners’ Amway distributorship was
a trade or business within the meaning of section 162.
Background
Some of the facts have been stipulated and are so found.
Petitioners are husband and wife. They filed a timely joint
Federal income tax return for each year in issue. At the time
the petition was filed, petitioners resided in Fredericksburg,
Virginia.
At all relevant times Joe Guadagno was an officer in
the U.S. Marine Corps. Through June 1996, and then again
from December 1996 through February 1997, Susan Guadagno was
employed full time as a systems analyst by Systems Maintenance &
Technology, Inc.
Toward the end of 1995, while living in North Carolina,
petitioners were contacted by a distributor of Amway products;
soon thereafter they became users and distributors of Amway
products. Petitioners moved to Virginia in 1998. They continued
to use and distribute Amway products throughout the years in
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