Karl Meyer and Vickie Meyer - Page 9




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               E.  Petitioners’ Separation and Its Effect on the Amway                
          Activity                                                                    
               Upon becoming Amway distributors in August 1994, petitioners           
          assigned themselves different roles.  Because Mrs. Meyer had                
          virtually no time to spend operating a business outside the home            
          due to parental obligations, and because of Mr. Meyer’s                     
          experience as a salesman, the task of operating the Amway                   
          activity was initially assumed by Mr. Meyer.  Indeed, on their              
          income tax returns, petitioners identified Mr. Meyer as                     
          “proprietor” of the distributorship.                                        
               In contrast, Mrs. Meyer assumed responsibility for taking              
          care of the paperwork for the Amway activity.  This                         
          responsibility included inputting data related to income and                
          expenses onto Quicken, the personal finance software program.               
          Mrs. Meyer would then periodically compile a list of expenses for           
          the preceding month.  In addition to such paperwork tasks, Mrs.             
          Meyer also “associated” with the wives of prospective and actual            
          “downline” distributors.                                                    
               In or about 1996 petitioners experienced marital problems              
          that lead to their separation in October 1996 and the                       
          commencement of an action for divorce that December.  Mr. Meyer             
          disassociated himself from the Amway distributorship, and Mrs.              
          Meyer assumed her husband’s role.  In particular, petitioners               
          filed a Business Status Change Form with Amway in October 1996,             
          which form served to remove Mr. Meyer’s name from the                       





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