- 10 - 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’sPage: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 NextLast modified: November 10, 2007