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During 1996, Mrs. Smith began selling for direct marketing
companies. During 1998 and 1999, Mrs. Smith was involved with
selling spray vitamins. On Schedules C, Profit or Loss From
Business, of their joint Federal income tax returns for 1998 and
1999, petitioners reported losses of $34,049 and $47,493,
respectively, related to Mrs. Smith’s direct marketing
activities.
During 2000, 2001, and 2002, Mrs. Smith stopped selling
spray vitamins and instead became involved in four other direct
marketing companies: (1) Espial U.S.A., Ltd. (Espial), (2)
Renaissance The Tax People, Inc. (Renaissance), (3) Cyberwize.com
(Cyberwize), and (4) 24/7 Internet Marketing. The products that
Mrs. Smith marketed from Espial included energy supplements,
power-oxygenated water, and skin-care products. The products
marketed for Cyberwize included nutritional supplements and a
travel product. The products marketed for 24/7 Internet
Marketing included marketing materials to help recruit other
individuals interested in direct marketing opportunities as well
as candy and other food products.
The products Mrs. Smith marketed for Renaissance were part
of what Renaissance called its “Tax Relief System”. Customers
could purchase the system, which consisted of various written and
audio materials designed to generate Federal income tax
deductions, for $300. Mrs. Smith purchased what Renaissance
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Last modified: November 10, 2007