Robert A. Eder - Page 6




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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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