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member of Mrs. Smith’s Renaissance team was her friend Walt
Holcomb. Mrs. Smith lent Mr. Holcomb $12,000 in the same year
that he purchased the Tax Relief System.
Overall, Mrs. Smith’s direct marketing activities have
proved unsuccessful. On the Schedules C of their joint Federal
income tax returns for 2000, 2001, and 2002, petitioners reported
gross receipts of $19,869, $16,014, and $46,587, respectively,
related to Mrs. Smith’s direct marketing activities. For the
same years, petitioners reported total losses of $26,856,
$34,155, and $17,256, respectively. These losses included the
reported use of 40.48 percent of their residence for regular and
exclusive business activity. The 2002 loss included wages
totaling $14,060 paid to petitioners’ two sons.
In subsequent years, petitioners’ gross receipts from the
activities rose to $54,793 in 2003 before falling to $18,294 in
2004 and $17,947 in 2005. In 2003, petitioners reported that
Mrs. Smith’s activities broke even. In 2004, petitioners
discontinued claiming deductions for the business use of their
residence, car and truck expenses, and supplies and reported a
profit of $758. In 2005, petitioners also stopped claiming a
deduction for wages paid to their sons and reported a profit of
$7,354. Mrs. Smith testified that these expenses could no longer
be justified as deductions because the nature of Mrs. Smith’s
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Last modified: November 10, 2007