William C. and Dorothy M. Smith - Page 2




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          and $3,099.60 for the years 2000, 2001, and 2002, respectively.1            
          The issues presently before the Court for decision are:                     
               1.  Whether petitioner Dorothy M. Smith’s direct marketing             
          activities were conducted with an actual and honest intent to               
          profit.  We hold that they were not;                                        
               2.  whether petitioners are liable for penalties pursuant to           
          section 6662(a) and (b)(1).  We hold they are not.                          
                                  FINDINGS OF FACT                                    
               Some of the facts have been stipulated, and the stipulation            
          of facts and the accompanying exhibits are incorporated by this             
          reference.  Dr. William C. Smith and his wife Dorothy M. Smith              
          resided in Rossville, Georgia, at the time their joint petition             
          was filed with this Court.                                                  
               Dr. Smith is a medical doctor and was engaged in the                   
          practice of medicine during the years at issue.  Mrs. Smith                 
          graduated from college with training as an accountant.  Later               
          Mrs. Smith became a registered nurse and worked as a nurse from             
          1981 to 1995.  During this period, Mrs. Smith also worked as an             
          administrator with a home health agency.  At the end of this                
          period, Mrs. Smith was earning approximately $75,000 a year.                




               1Unless otherwise indicated, all section references are to             
          the Internal Revenue Code, as in effect for the years in issue,             
          and all Rule references are to the Tax Court Rules of Practice              
          and Procedure.                                                              





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