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relied upon Melaleuca insiders. This failure to become educated
in the economics of operating a profitable home-based business
strongly suggests that petitioners were using and marketing
Melaleuca products for purposes other than profit. See Ogden v.
Commissioner, T.C. Memo. 1999-397, affd. 244 F.3d 970 (5th Cir.
2001).
Petitioners’ Melaleuca activities have resulted in
substantial losses. While losses that are incurred in the
initial stages of an activity do not necessarily suggest the
absence of an honest profit objective, losses that continue
without explanation may indicate the lack of a profit objective.
See Golanty v. Commissioner, supra at 427. Petitioners reported
losses of $49,590, $45,114, and $67,738, for the years at issue.
This after having already been involved with Melaleuca since
1992. Further, despite these year after year losses, there is no
evidence that petitioners changed tactics to increase the
likelihood of earning a profit.
Both petitioners worked full-time jobs. This left little
time for petitioners to spend on their Melaleuca activities.
Despite this apparent lack of time, Mr. Berryman testified that
on as many as five nights a week, petitioners would host
gatherings of between 1 and 25 prospective customers. We find
Mr. Berryman’s testimony lacked credibility, especially in the
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