Zeekrewards tax question:

Earnings are made by Affiliates purchasing bids, and giving them away to customers. Purchased bids given away to customers are converted to points good for 90 days. Each day affiliates share in company profits, (average 1.5% currently) and have the choice of receiving cash, purchasing more bids to give away, or a percentage of both. The goal is to build your points high enough that you can keep a certain percentage for earned income while repurchasing bids to give away with the rest to enable residual income. A company example is to build your point level to 50k then keep 20% as income and repurchase 80% daily to maintain the point level, thus assuring residual income of about $4k per month.

Example:

Affiliate purchases 2000 bids for $2000.00 then gives them away as sample bids to customers. By giving them away to customers they become 2000 points good for 90 days. Each day is slightly different but the average income has been 1.5% per day. The first day the point level is multiplied by the daily percent and the affiliate earns $40.00. The affiliate has their "office" set to repurchase at 100% to create rapid growth adding to their original 2000 points and so on. The affiliate continues to re purchase at 100 percent for 14 months to reach the 50k point goal. Because the points are only good for 90 days it takes awhile to build that high.

A. Initial purchase $2000.00

B. After 14 months points level is at 54,654.

C. Share of company profit to get this far is $1,039,364.00 Keep in mind this number is XXXXX because the points earned are only good for 90 days, after day 90 points are dropping off each day.

D. Actual money affiliate received from zeekrewards = $0.0 for first 14 months.

E. Zeekreward's state that daily profit earnings are taxable even when you re purchase all of said earnings and never receive any payment. Their wording is "cash received by constructive receipt".

F. Zeekreward's goes out of their way to state that affiliates own no "stock" and buying bids to give away is not an "investment"

G. Someone else asked what I am asking but was not very clear. Therefore there was no clear answer:
http://www.justanswer.com/tax/6keyn-need-tax-expert-what-zeek-rewards.html

Questions:

The big question is; does the affiliate owe taxes on 1 million dollars, or is there some way to explain or write this off as a business expense. I personally have not purchased a business license yet. What would be a good strategy to deal with this. Thank you

Optional Information:
State/Country relating to question: Colorado

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