- 4 - distributor purchased the platinum service.4 Thus, if an upline distributor sold the system and a year’s subscription to the platinum service, he earned commissions totaling $66. An upline distributor also earned commissions based on a downline distributor’s sales and on the downline distributor’s success in developing his own downline distribution network. See Elliott v. Commissioner, 90 T.C. 960 (1988), affd. without published opinion 899 F.2d 18 (9th Cir. 1990), for a general discussion of multi- level marketing. Petitioner David Sears (Mr. Sears) was recruited as a downline distributor in August 1999. He also purchased the platinum service, which he maintained until he discontinued his involvement with RTP in 2001.5 To generate sales and recruit downline distributors of his own, he frequently went to coffee shops or doughnut shops and initiated conversations with other patrons about taxes. Mr. Sears would mention the RTP system “as an alternative to just complaining” about taxes. He also invited acquaintances to dinner to discuss the system. During this time, 4 The upline distributor did not provide the tax advice and other services to downline distributors. RTP provided such services directly. 5 Petitioner Carol McCabe (Ms. McCabe) also purchased the system and the platinum service; however, petitioners do not claim that Ms. McCabe’s RTP activity was a trade or business for Federal income tax purposes. They testified that only one person was covered by the $100 platinum service fee. Thus, in order for Ms. McCabe to receive tax and financial planning advice of her own, she had to purchase separately the system and the platinum service.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011