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Under the Amway system, the upline distributor’s income depends
on the downline person’s sales, so the upline person’s interest
is to keep as many people as possible in his organization without
regard to profitability. Nissley v. Commissioner, T.C. Memo.
2000-178.
The amount of profits in relation to the amount of losses
incurred, and in relation to the amount of the taxpayer’s
investment and the value of the assets used in the activity, also
are relevant in determining the taxpayer’s intent. Sec. 1.183-
2(b)(7), Income Tax Regs. Petitioners’ gross receipts of $150
and $84.63 in 1996 and 1997, respectively, were trivial in
relation to their total claimed expenses of $11,902 and
$15,781.39, respectively. The magnitude of these discrepancies
is an indication that petitioners did not have the requisite
profit objective. See, e.g., Burger v. Commissioner, T.C. Memo.
1985-523, affd. 809 F.2d 355 (7th Cir. 1987).
We do not question that petitioners spent some time and
money in their Amway activity. But petitioners’ evidence as to
the extent of these efforts and expenditures is questionable and
exaggerated. The claims to mileage exceed the distances to some
of their claimed destinations. Petitioners presented numerous
receipts for expenditures for Amway tools, but there are no
checks to substantiate the payments. The upline sponsors,
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