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Back in the United States, Yung was working at his regular
full-time job as well as industriously developing ways to make
money on the side. The main focus of his efforts was NuSkin, a
multilevel marketing company. Yung acted as an independent
contractor for NuSkin, incurring various business expenses such
as gas, car maintenance and insurance, tolls, and business meals.
By his own testimony, Yung was very frugal in his day-to-day
expenses: he scheduled his business meetings to avoid paying
multiple tolls; he bought “a few” used cars rather than a new car
and got special deals from a mechanic when he needed those cars
repaired; and he treated his prospective clients to meals at only
inexpensive restaurants. Yung kept receipts for many of his
expenses but, as with Gourmet Down Under, he did not have the
sort of systematic records of income and expenses customarily
kept by businessmen.
In April 1999, Yung filed a joint tax return with his wife,
Anita. They did not use a professional preparer, and claimed
more than $40,000 in partnership losses and thousands more in
self-employment expenses. The effect on their tax bill was
dramatic--if allowed, the losses would completely eliminate their
combined taxable income. The Commissioner sent the Chongs a
notice of deficiency, denying each of the claimed deductions,
stating “it has not been established that the expenses were
incurred and paid during the taxable year.” The Commissioner
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Last modified: May 25, 2011