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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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