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4. The Success of the Taxpayer in Carrying On Other Similar or
Dissimilar Activities
The fact that the taxpayer has engaged in similar activities
in the past and converted them to profitable enterprises may
indicate that he engaged in the present activity for profit.
Sec. 1.183-2(b)(5), Income Tax Regs. The taxpayer’s success in
other business activities may also indicate a profit objective.
Hoyle v. Commissioner, T.C. Memo. 1994-592.
Petitioners testified they had experience with other network
marketing businesses. The record contains little information
about any of these activities. Mr. Sears did describe a network
marketing activity involving “Cell Tech,” which he said sold
digestive aids and various natural supplements. This may be the
activity described in a 1999 Schedule C as “Sales - Nutritional
Products.” In any event, the Schedule C reported a $4,691 loss
and thus does not indicate success in a similar or dissimilar
activity. Because there is no indication that any of
petitioners’ other activities were profitable, this factor is
neutral. See sec. 1.183-2(b)(5), Income Tax Regs.
5. The Taxpayer’s History of Income or Losses With Respect to
the Activity
A series of losses during the initial or startup stage of an
activity may not necessarily be an indication that the activity
is not engaged in for profit. Sec. 1.183-2(b)(6), Income Tax
Regs. Petitioners began the RTP activity in 1999, reporting a
loss of $8,372. In 2000, they reported a loss of $14,751.
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Last modified: May 25, 2011