Kenneth J. Nissley and Terri C. Connor Nissley - Page 4

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               During the years in issue, petitioners operated an Amway               
          distributorship under the name of “KT Enterprises”.  Petitioners            
          began their Amway activity in May or June 1991, when they were              
          recruited as “downline” distributors by an “upline” distributor.            
          At the time of trial, petitioners were continuing to pursue their           
          Amway activity.                                                             
               Amway is a supplier of household and personal use products             
          that are sold by individuals (distributors) through direct                  
          marketing.  An Amway distributor purchases Amway products for               
          resale to both customers and “downline” distributors, as well as            
          for personal use.                                                           
               At least in theory, Amway distributors generate receipts by            
          selling Amway products directly to customers and by recruiting              
          new distributors.  The new recruits become “downline"                       
          distributors of the sponsoring distributor and a part of his or             
          her organization.  (The sponsoring distributor is referred to as            
          the “upline” distributor.)  In turn, each “downline” distributor            
          is encouraged to sponsor additional new distributors, all of whom           
          become a part of the initial distributor’s organization.  (The              
          process of recruiting new distributors is often referred to as              
          “building the legs” of a distributor's network.)  Amway does not            
          assign exclusive geographical territories to any distributor, nor           
          does Amway impose a minimum sales quota on any distributor.                 

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