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a profit. Mrs. Smith had no experience operating a direct
marketing business at the time she was recruited by her upline
distributor, Ms. Walsh. Despite this lack of experience, Mrs.
Smith has principally relied only on advice she has received from
Ms. Walsh and other insiders. While Ms. Walsh had experience as
a distributor for direct marketing companies, as Mrs. Smith’s
upline distributor Ms. Walsh did not need to concern herself with
Mrs. Smith’s profitability so long as Mrs. Smith was able to sell
products or recruit others to sell products. See, e.g., Poast v.
Commissioner, T.C. Memo. 1994-399 (“for the most part,
petitioners’ advisers were not experts as much as they were
upliners with a financial stake in petitioners’ retail and
downline sales”). Ms. Walsh did not review any financial
statements or budgets with Mrs. Smith. Thus, we took Ms. Walsh
at her word when she testified that she was not so much concerned
about the past––or Mrs. Smith’s previous losses––as she was Mrs.
Smith’s ability to sell and recruit others.
Mrs. Smith testified that she also sought business advice
from her accountant. However Mrs. Smith was contradicted by Ms.
Clark herself, who testified that her advice to Mrs. Smith was
largely confined to matters related to the preparation of Mrs.
Smith’s tax returns. Ms. Clark did not review any financial
statements or budgets for Mrs. Smith, and there is nothing in the
record to suggest that Ms. Clark had any experience or expertise
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