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than the Amway “9-4-2 plan”) ever developed.
Furthermore, for the year in issue, no in-depth analysis was
ever performed in order to determine how many “downline”
distributors were needed to attain a break-even point. Although
Mrs. Meyer estimated that 25 distributors were required to attain
a “bare bones” standard of living, such estimate was not based on
a business plan or any independent analysis. Rather, Mrs. Meyer
was content to rely on the profitability worksheet given to her
by an “upline” distributor.
A third factor militating against petitioners’ claim of
profit objective is the fact that petitioners had no experience
with Amway or an Amway type of activity at the time that they
were recruited by an Amway distributor. See sec. 1.183-2(b)(2),
Income Tax Regs. Since that time, petitioners have principally
relied only on advice from “upline” distributors and other
interested Amway individuals.
Yet, under the Amway system, the “upline” distributor’s
bonus is not directly affected by the “downline” distributor’s
profitability or lack of profitability; rather, what is important
to the “upline” distributor is the “downline” distributor’s
volume of sales. Nevertheless, petitioners have steadfastly
refused to seek meaningful counsel from disinterested third
parties regarding means by which the Amway activity might be made
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