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purchase products at a discount as well as claiming business
expense deductions for personal expenses.
We find this factor to be neutral. In part, Mrs. Smith
enjoyed personal or recreational benefits by engaging in this
activity. The record suggests that some of her downline
distributors were her friends long before their business
involvement with Mrs. Smith. In one case, Mrs. Smith even lent
$12,000 to a friend in the same year he became a downline
distributor for Renaissance. Further, many of Mrs. Smith’s
activities included elements of personal recreation, including
traveling to different cities and enjoying meals with friends.
Finally, Mrs. Smith enjoyed the benefit of being able to claim
business expense deductions for personal expenses such as her car
and home.
There were, however, elements of these marketing activities
which seem to lack any indication of personal recreation,
including placing advertisements in newspapers to recruit
downline distributors and responding to the resulting phone calls
inquiring about these opportunities. Thus, we find this factor
to be neutral.
10. Conclusion
On balance, we find that Mrs. Smith was not engaged in her
direct marketing activities with an actual and honest objective
of making a profit. We do not lose sight of the fact that one of
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Last modified: November 10, 2007