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When questioned whether his downliners sell the products,
petitioner testified:
Generally, no. The way the plan is written is, you're
taught to purchase things from yourself for yourself, and
you get other people -- say, Look. Just change your buying
habits. Don't go to HEB. Don't go to Eckerd's. Don't go
to Sam's. You get access to all these products. Change
your buying habits. Buy things for yourself.
Petitioner also conceded that petitioners' personal
purchases were more than the purchases they acquired for resale
to other customers or downline distributors. Specifically,
petitioner admitted that in 1992 he bought $4,500 of products for
personal use and $3,262 of products for other purposes. For
1993, he conceded he bought $10,729 of products for personal use
and $4,991 of products for other purposes.
Petitioners have consistently reported tax losses on their
Amway activity. Although only taxable years 1992 and 1993 are at
issue here, petitioners have claimed net losses from their Amway
activity for taxable years 1991 through 1995, of $2,745.06,
$11,073.51, $14,881, $13,008, and $11,681, respectively.
Petitioner could not explain with any detail or certainty
how or when the Amway activity would become profitable. He could
not explain how many downliners he needed to recruit in order to
realize a profit. Moreover, he stated that when downliners
purchased products through petitioners the purchases were at
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