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In 1998, petitioner prepared a “Reliv Cold Marketing
Budget”, listing anticipated expenditures but showing no
projected receipts or profits. He reused this “budget” for each
succeeding year. For 2002, this “budget” showed total expenses
of $11,145 but no receipts or profits. Until preparing for this
trial, petitioner had never prepared a business plan for his
Reliv activity, nor had he calculated a break-even point showing
how much future profit he would need to recoup his past losses.
Petitioner maintained no organized record-keeping system.
On Schedules C, Profit or Loss From Business, of Forms 1040,
U.S. Individual Income Tax Return, for taxable years 1997 through
2005, petitioner reported net losses from his Reliv marketing
activity as follows:
Tax Gross Operating Net
Year Income Expenses Losses
1997 $233.00 ($2,925.00) ($2,692.00)
1998 688.00 (9,431.00) (8,743.00)
1999 376.08 (9,350.11) (8,974.03)
2000 732.02 (8,833.54) (8,101.52)
2001 1,003.13 (9,967.82) (8,964.69)
2002 1,123.68 (12,894.71) (11,771.03)
2003 1,221.16 (11,629.79) (10,408.63)
2004 1,633.18 (11,834.31) (10,201.13)
2005 1,616.02 (1,616.02) --
In the notice of deficiency, with respect to petitioner’s
2002 taxable year, respondent determined that petitioner was not
engaged in the Reliv activity for profit and that consequently he
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Last modified: March 27, 2008