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conditioned during the years in issue, and there was no bathroom
in the shop because it was near petitioners’ residence.
Following completion of the race shop, it housed the Legends race
cars owned by Flair Racing, trailers used to haul the Legends
race cars, petitioners’ personal motor home used by petitioners’
family when they traveled to races, an old pickup truck owned by
one of petitioner’s friends, as well as petitioners’ personal
lawnmower. In 2002, petitioners acquired an additional parcel of
land adjacent to the 80-acre tract for the purpose of building a
test track for his Legends race cars. The test track was
completed shortly before trial of this case in January 2007.
Flair Racing did not have any employees during the years in
issue and did not pay petitioner a salary. Petitioner made all
decisions about what expenses were paid from the Flair Racing
bank account, and only petitioners had signature authority on
that bank account. The mortgage payments on petitioners’ 80-acre
tract, which included improvements such as petitioners’ personal
residence and the race shop, were paid automatically from Flair
Racing’s bank account monthly. The mortgage payments were posted
on Flair Racing’s books as “notes payable”, except one payment in
November 2000 that was posted to a “loan from shareholder”
account. The purchase of the 80-acre tract was entered on Flair
Racing’s depreciation schedules in the amount of $80,000. In
September 2000, $13,625 was paid from Flair Racing’s bank account
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