Once a partner buys a contract (level 1 to 12), it's non refundable, you cannot get it back. The only way to get your investment back is to earn commission by referral, and get paid in ETH. I think everything goes in schedule C here, no passive income. So in schedule C, 

Revenue (commissions)

Expenses:  Depreciation (section 179 of intangible asset, the smart contracts)

If ETH as virtual currency considered as "property" an asset, how is it depreciated? It can't be, so you don't include it in asset worksheet. So you would then use Sch D, can this be linked to that Schedule C so that it is not passive income/rather an active income or is it passive income? I am uncertain as to the commission being taxed as earned income, but if they have not cashed out the ETH, and when they do and somehow it is a loss, it will be a capital loss that will need to be applied to capital gain (not against ordinary income they were taxed on). 

Thank you.