James R. and Janet M. Landrum - Page 15

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          supposedly petitioners’ personal friends, and others in the Amway           
          chain, did not testify to confirm petitioners’ efforts and                  
               Substantial income from sources other than the activity may            
          indicate that the activity is not engaged in for profit,                    
          particularly if the losses from the activity generate substantial           
          tax benefits.  Sec. 1.183-2(b)(8), Income Tax Regs.  Petitioners            
          were not wealthy people.  They explain their needs for funds for            
          retirement and other purposes.  However, in the years in issue,             
          Mr. and Mrs. Landrum maintained full-time jobs apart from their             
          Amway activity.  They reported combined wages for 1996 and 1997             
          of $83,797.08 and $86,401.55, respectively.  This income was more           
          than sufficient to allow their Amway losses to generate                     
          substantial tax benefits.                                                   
               Mr. Landrum said he enjoyed meeting “good people” in his               
          Amway sales efforts, although he did not enjoy the rejection of             
          his proposals.  Petitioners qualified to attend Amway promotional           
          weekend meetings by accumulating the required points within a               
          limited time.  They qualified by buying a vacuum cleaner and                
          making other Amway purchases themselves, not by selling to others           
          or enlisting downline distributors.  Nevertheless, petitioners              
          attended numerous inspirational weekend programs, both together             
          and separately.  Mr. Landrum explained the excitement and                   

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Last modified: May 25, 2011