Joe Guadagno and Susan Beth Rishel Guadagno - Page 8

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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,               
               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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