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As Amway distributors, petitioners were entitled to purchase
for their personal use Amway products at distributor’s cost
without the customary 30-percent markup. In 1994, 1995, and
1996, petitioners purchased Amway products valued at $2,133,
$3,282, and $3,786, respectively, for their personal use.
Since inception, petitioners have treated their Amway
activity as a proprietorship on Schedule C, Profit or Loss From
Business, of their Federal income tax return. Petitioners
describe their activity on Schedule C as “product distribution”
but do not identify the activity as an Amway distributorship.
Petitioners have never succeeded in earning a profit from
their Amway activity. Rather, petitioners have consistently
claimed losses from their Amway activity and have used such
losses to offset their other income, principally salary (or net
profit from business consulting) from their full-time positions.
The following schedule reflects the losses claimed by petitioners
from their Amway activity on Schedule C of their tax returns for
1991 through 1998:
Year Net Loss
1991 (part year) $ 10,258
1992 27,726
1993 19,705
1994 27,407
1995 33,539
1996 27,787
1997 22,225
1998 19,107
$187,754
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