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operating their Amway activity. Petitioners' Amway activity
resulted in a net loss for taxable years 1992 and 1993. Although
it is not unusual for a business to incur losses in its early
years, we believe that petitioners never had any intention of
making a profit from this activity.
Petitioners contend that their Amway activity was motivated
by profit. Petitioners averred that they carried on their Amway
activity in a businesslike manner, maintained complete and
accurate financial records and books, studied the market and
strategies of others, attended seminars, and conformed their
sales techniques with more successful approaches. However, the
record indicates that petitioners did not operate in a
businesslike manner. Petitioners did not have a business plan,
nor did they conduct a break-even analysis. Petitioners had no
budget.
Petitioner candidly admitted in court that one of the major
benefits of being an Amway distributor was that such distributors
could purchase various products for personal use at a discount of
15 to 50 percent, if not more. He further stated that the
opportunity to purchase discounted products was a benefit. His
testimony evidenced that petitioners used their Amway
distributorship for their own personal financial gain. He
stressed this benefit when he made sales pitches in his attempts
to recruit potential downliners.
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Last modified: May 25, 2011