corporation, Island Ventures, Inc., a North Carolina corporation,
as owner of the boat, the bill of sale, a note and security
agreement, and other financial disclosure forms required by law.
Mr. Hilliard's prior boat experience made him aware that boats
generally do not appreciate in value.
The fishing boat was purchased by petitioners jointly with
Island Charters Corp., set up by petitioners to be the corporate
owner of the boat. Island Charters Corp. was utilized to avoid
Florida sales taxes of $10,000 on the fishing boat purchase.
Two months after payment and prior to delivery of the
fishing boat, petitioners discovered that Inter Island Charters
ceased business and that payments were not being made to the bank
on the promissory note. Mr. Hilliard traveled to Florida and
arranged with Mr. and Mrs. Winters to handle the charter
activities. Mrs. Winters had been an employee of Inter Island
Charters. The arrangements were made with the Winterses at a
time when Mr. Hilliard was aware that Inter Island Charters had
gone out of business and Mr. Hilliard had been interviewed by the
Federal Bureau of Investigation concerning Inter Island Charters
and its employees. Mr. Hilliard did not ask the Winterses why
Inter Island Charters failed.
The Winterses controlled the fishing boat and rented it just
one time during the period 1985 through most of 1987. The
Winterses allowed the fishing boat to fall into a state of
disrepair. Around that time, Mr. Hilliard received a call from
Mr. Quartiano, a Florida shark fisherman, who advised him that
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