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earned a profit but have incurred losses for 8 consecutive years.
Indeed, at the time of trial in November 1999, petitioners
expected to incur another loss for what would be the ninth
consecutive year.
Moreover, petitioners’ losses have been substantial in
amount, ranging between $19,107 and $33,539 for each of the 7
years during which petitioners have conducted their Amway
activity for a full 12 months. Indeed, petitioners’ aggregate
losses for the 7-1/2-year period from mid-1991 through 1998
amount to $187,754 and average over $25,000 on an adjusted annual
basis.
Further, there has not been any significant trend
discernible in the history of petitioners’ losses. For 1994
through 1996, the 3 taxable years in issue, petitioners incurred
losses of $27,407, $33,539, and $27,787, respectively. While it
is true that petitioners’ losses have decreased since 1996, it is
also true that a comparison of 1997 and 1996 demonstrates that
petitioners’ gross income decreased at a faster rate (57 percent)
than did petitioners’ expenses (34 percent). The same is true
when 1998 and 1996 are compared.
Also relevant is the fact that “the goal must be to realize
a profit on the entire operation, which presupposes not only
future net earnings but also sufficient net earnings to recoup
the losses which have meanwhile been sustained in the intervening
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