Forbes.com published an article about Joecool's blog. Blogger Peter Reilly has authored a number of posts about Amway independent business owners (IBOs) who have been screwed up in tax court. Essentially, independent business owners (IBOs) frequently lack a business plan and, in the opinion of the Internal Revenue Service, lack a genuine profit motivation. Consequently, if an IBO attends gatherings and meetings only for the purpose of socialising rather than conducting real business, the deductions may be denied.
Consider the information in the article. It's an excellent read!
Excerpts:
I was astonished to discover that I hadn't written about an Amway case in more than two years, as I had expected. According to the most recent decision, James E. Hess, like virtually every other taxpayer who has ever challenged the disallowance of Amway losses in Tax Court, has been unsuccessful. Cases involving Amway are a subgroup of Section 183 (often referred to as hobby loss) cases.
The rule is that in order to claim losses on your tax return, the underlying activity must have been one in which you were attempting to gain money at the time. It has been my pleasure to write about a wide range of hobbies in which the taxpayer has challenged an IRS hobby loss determination—musicians, artists, drag racing enthusiasts, slot machine players, and even bloggers, to name a few. Horses and Amway, on the other hand, are the most prevalent. However, the horse people are frequently victorious, but the Amway people are almost always defeated.
The Tax Court Appears to Side With the Opponents
My favourite aspect of this choice is how closely it resembles critiques of the Amway experience, which appear to have their own segment of the blogosphere to which they seem to have given birth. For example, Joecool of Amway – The Dream Or The Scheme? recently wrote in an article titled Amway Success? about his experiences with the company.
One of the things we were informed was that we have to submit to our upline. The members of our group were instructed that upline would never intentionally lead them astray, so we should put our faith in them and never try anything without first consulting upline.
Our group was taught to reduce debt, but, strangely, upline stated that it was acceptable to incur additional debt in order to attend an event or purchase additional CDs.
Whenever we inquired about the amount of income uplines may have earned, we were either informed it was none of our concern or provided a Xerox of a bonus check that someone upline may have received ten years prior to the time of inquiry. It was upline who showed out photographs of sports vehicles and mansions as proof that the business was successful for us.
Losing money is considered a victory. On numerous occasions, our group was informed that losing money was a sign of success. It was a success because we were making a long-term investment in ourselves. That the business is truly not about making money, but rather about making friends. I guess upline taught this because everyone was losing money at the time, and it was comforting to hear that success was just around the corner, and that we were all nicer people who were well on our way to success if we just went to more gatherings and purchased more standing orders.
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