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Respondent determined deficiencies in petitioners' Federal
income taxes of $5,404 for 1996, $5,978 for 1997, and $2,478 for
1998. The issue for decision is whether Brenda Konchar
(petitioner) conducted her Mary Kay Cosmetics distribution
activity with the intent to earn a profit, and if so, whether she
has substantiated that she incurred ordinary and necessary
business expenses.
Some of the facts have been stipulated and are so found.
The stipulation of facts and the exhibits received in evidence
are incorporated herein by reference. At the time the petition
was filed, petitioners resided in Hobart, Indiana.
Background
During the years at issue petitioners had four minor
children all of whom lived with them at home. Mr. Konchar worked
full time in construction. In 1996 and 1997, petitioner worked
about 17 hours a week at a Montgomery Ward department store as a
furniture salesperson. Petitioner changed her place of work to
the men's fragrance department of a May department store for
about a month, full time during the Christmas season of 1998.
In May of 1996, petitioner joined Mary Kay Cosmetics as an
"Independent Beauty Consultant". Before 1996, petitioner's
sister was a Mary Kay consultant. When petitioner became a
consultant in 1996, she took over 12 of her sister's customers
consisting of family members and friends.
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