Karl Meyer and Vickie Meyer - Page 12

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                    Year                     Net Loss                                 
                    1994                     $4,216                                   
                    1995                     12,805                                   
                    1996                     16,295                                   
                    1997                     11,251                                   
                    1998                     4,997                                    
                                            49,564                                   

               Since 1998 petitioners have not claimed any losses from the            

          Amway activity.                                                             

               Petitioners determined the amounts of their losses from the            

          Amway activity on Schedules C of their tax returns for 1994                 

          through 1998 as follows:                                                    


               1994       1995        1996       1997       1998                      
          Gross income1                $27     $1,037        $504       $407     $2,810
          Less: expenses             4,243     13,842      16,799     11,658      7,807
          Net loss                   4,216     12,805      16,295     11,251      4,997

                    1 Gross income was essentially the bonuses earned from the        
               sale (or personal consumption) of Amway products by “downline”         
               distributors.  Petitioners themselves sold relatively few Amway        
               products.                                                              


               Petitioners deducted expenses for the Amway activity on                

          Schedule C of their tax returns for 1994 through 1998 as follows:           

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