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result merely from comparing the number of factors that suggest a
profit motive against the number of factors that suggest the
opposite. See sec. 1.183-2(b), Income Tax Regs.
After careful consideration, we are satisfied that
petitioners did not engage in the sale and distribution of Amway
products with the profit objective necessary for that activity to
be considered a trade or business within the meaning of section
162 during any of the years in issue.7 Our conclusion in this
regard is particularly influenced by the following.
Before becoming Amway distributors, petitioners had neither
experience with Amway nor experience in running a business.
Nevertheless, they did not seek independent business advice at
the outset, and they did not seek independent business advice
afterwards even though losses were sustained year after year.
Instead, they relied upon other Amway distributors whose advice
is more accurately characterized as personal motivational advice
than strategic business advice. Under the circumstances,
petitioners’ failure to seek independent business advice strongly
suggests that they were distributing and using Amway products for
purposes other than profit. See Ogden v. Commissioner, T.C.
Memo. 1999-397, affd. 244 F.3d 970 (5th Cir. 2001).
7 Although neither party specifically addressed the point,
our analysis presumes that respondent bears the burden of proof.
See sec. 7491(a).
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Last modified: May 25, 2011