- 12 -
Petitioners’ Amway activity has resulted in substantial
losses. Losses that are incurred in the initial stages of an
activity do not necessarily suggest the absence of an honest
profit objective. However, losses that continue without
explanation beyond that period typically required for an activity
to become profitable may indicate the lack of a profit objective.
See Golanty v. Commissioner, supra at 427; Conner-Nissley v.
Commissioner, T.C. Memo. 2000-178; Ogden v. Commissioner, supra.
Despite year after year of losses, petitioners did not change
tactics to increase the likelihood of earning a profit.
For the most part, the losses that petitioners incurred year
after year are attributable to automobile and travel expenses
(including the expenses incurred in attending various seminars).
Petitioners did not concentrate on selling Amway products to
customers, thereby eliminating sales as a potential source of
profit. A substantial portion of the income earned from bonuses
they received each year was paid out to their downline
distributors. Other components of income were completely offset
by matching expenses for the same items. Against the slim margin
for profit, petitioners haphazardly incurred significant
expenditures for automobile and other travel expenses in order to
recruit downline distributors primarily from the ranks of family,
friends, and acquaintances, some of whom lived considerable
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
Last modified: May 25, 2011