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presumably had to compete with some of the roughly 360,000 Amway
distributors for sales and recruits. Petitioners’ lack of
control over their downline distributors hampered their ability
to predict sales and, in turn, performance bonuses. Their
difficulty in predicting performance bonuses was compounded by
Amway’s practice of varying the point value it assigned to a
given product. Petitioners’ lack of control over these key
components of their distributorship caused any predictions of
performance bonuses that they might have made to be, at best,
uncertain.
Included with petitioners’ timely filed return for each
year is a Schedule C, Profit or Loss From Business. Each
return was prepared by a certified public account who also was
an Amway distributor. Petitioners’ Schedules C for 1996 and
1997 list their principal business as “Amway”. For 1998,
petitioners’ Schedule C lists their principal business as
“DistConsumerProduct”. Petitioners reported net losses of
$26,264, $24,047, and $19,810 on their Schedules C for 1996,
1997, and 1998, respectively.5
5 From petitioners’ trial presentation, it appears to us
that, technically, petitioners conducted their Amway
distributorship as a partnership, the income and expenses of
which are not properly reportable on a Schedule C, Profit or Loss
From a Sole Proprietorship, under any circumstance. See secs.
701 through 777. Nevertheless, because the parties ignored this
technicality, we do likewise.
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