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petitioners (at the so-called emerald level) and sometimes would
work with them. Mr. Landrum explained that his friend and upline
adviser told him he would have to spend $500 per month on
inspirational and instructive tapes and materials, for
approximately 3 months, and then he could expect to gross $500 to
$1,000 or more monthly from Amway. From this advice, what they
read in Amway literature, and what they heard at Amway seminars,
petitioners say that when they started a fourth time in 1995 they
expected to start making a profit in 90 days. Despite mounting
losses, petitioners continued their Amway activity for more than
2 years beyond the 90-day trial period, long after it was clear
that the activity was not viable. The regulations provide that
“where losses continue to be sustained beyond the period which
customarily is necessary to bring the operation to profitable
status such continued losses, if not explainable, as due to
customary business risks or reverses, may be indicative that the
activity is not being engaged in for profit”. Sec. 1.183-
2(b)(6), Income Tax Regs.
The exact date when petitioners commenced their fourth
effort at Amway is unclear, but petitioners’ own testimony
establishes that it was in 1995. Since petitioners might have
explained the starting date and failed to do so, we conclude that
the entire 90-day starting period that petitioners mention took
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