William C. and Dorothy M. Smith - Page 25




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          the four companies that Mrs. Smith distributed for during the               
          years at issue sold a purported product that was nothing more               
          than a tax strategy to convert personal expenses into business              
          expense deductions with a home-based business.  We are convinced            
          that this is precisely what Mrs. Smith was trying to do with her            
          direct marketing activities.                                                
               In conducting these activities, Mrs. Smith failed to employ            
          elementary business practices that one would expect of                      
          individuals pursuing an activity with a profit objective.  She              
          bounced from company to company without any apparent thought or             
          analysis of why the new company might help her stop losing money.           
          She spent freely without any evident plan on how she would recoup           
          those expenses.  And while diligent in maintaining records, in              
          the face of these year-after-year losses, there is no evidence              
          that Mrs. Smith used those records to analyze the merits of her             
          business: How she might stem her losses; what selling techniques            
          were most successful at achieving sales and at what cost; and how           
          and when she would break even.  She did none of the analysis that           
          one would expect someone operating a business for profit to have            
          undertaken.                                                                 
               Finally, the record reflects that Mrs. Smith had been                  
          involved in direct marketing activities for 5 years by the end of           
          the years at issue and had not yet made a profit in any of those            
          years, let alone begun to recoup the losses that she had                    







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Last modified: November 10, 2007