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activity to assess their potential for success, and they did not
seek independent business advice for turning around years of
operating losses. Petitioners’ failure to seek independent
business advice strongly suggests that petitioners did not carry
on the Amway distributorship in a businesslike manner.
Petitioners did not write a business plan, and, although
they kept track of expenses, they never established a budget.
Petitioner testified not only that they did not set up a budget,
but that by 1999 they had decided they were going to spend
“whatever it took to go to those meetings”. Petitioners did keep
receipts and detailed records, but apparently more for
substantiation purposes than as a tool for analyzing and
improving their business. See Lopez v. Commissioner, supra; Hart
v. Commissioner, T.C. Memo. 1995-55.
Petitioners’ Amway activity resulted in a substantial and
sustained pattern of losses. Between 1996 and 2000, the activity
produced very little income, and most of petitioners’ sales were
for their own use. Yet petitioners continued to incur
significant expenses, largely for automobile costs and other
travel-related expenses for attending out-of-town seminars.
Losses incurred in the initial stages of a business may be
expected, but 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
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