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distribution of Amway Corp. (Amway) products. The resolution of
this issue for each year depends upon whether petitioners’ Amway
distributorship was a trade or business within the meaning of
section 162.1
Background
Some of the facts have been stipulated and are so found.
Petitioners are husband and wife. They filed a timely joint
Federal income tax return for each year in issue. At the time
the petition was filed, petitioners resided in Houston, Texas.
Jorge Lopez holds a bachelor’s and a master’s degree in
petroleum engineering. At all relevant times he was employed
full time as a petroleum engineer by Altura Energy, Ltd. Vivian
Lopez described her occupation as housewife and homemaker.
In 1996, an “upline”2 distributor of Amway products
recruited petitioners to act as “downline” distributors.
Petitioners maintained this status throughout the years in issue.
Some time after 1999, petitioners ceased their Amway activity and
became involved in Quixtar, Inc., an Amway affiliate.
1 Unless otherwise indicated, section references are to the
Internal Revenue Code in effect for the years in issue, and Rule
references are to the Tax Court Rules of Practice and Procedure.
2 The term “upline” simply refers to one’s relative position
in a particular distribution chain of Amway products. One
becomes an upline distributor after successfully recruiting one
or more “downline” distributors.
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Last modified: May 25, 2011