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would be forthcoming and willing to pay a large enough daily
charter fee so that he would break even on his investment with
the boat being chartered only 3 to 5 days a month.
Petitioner made his Federal income tax returns for 1986 and
1987 on the basis of a calender year.
Ballard Marine
Ballard Marine, a Maine corporation, was organized on
September 2, 1986. The articles of incorporation of Ballard
Marine fail to state any purpose for which the corporation was
organized. Petitioner was the sole initial director of the
corporation. The initial officers of Ballard Marine were a
president and a treasurer. Petitioner was appointed to both
offices. Ballard Marine elected to be an S corporation within
the meaning of section 1361(a). Ballard Marine’s election to be
an S corporation was effective for its first taxable year.
Ballard Marine is a calender year taxpayer.
By contract dated October 17, 1986, Ballard Marine purchased
a 49-foot, MY MK III Gulfstar motor yacht (the yacht) for a total
contract price of $300,000. Ballard Marine also paid a Florida
sales tax of $15,000. Ballard Marine financed $175,000 of the
purchase price of the yacht with a bank loan. The yacht was
delivered to Ballard Marine on October 23, 1986, in Annapolis,
Maryland.
In connection with Ballard Marine’s purchase of the yacht,
Ballard Marine, or petitioner, consulted with legal counsel.
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