Charles A. Ballard - Page 5

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          Ballard Marine hired Walter Schintzius (Schintzius), a yacht                
          broker, for advice on, among other things, the operating                    
          characteristics of the yacht, its acceptability as a charter                
          boat, and its residual value.  Schintzius did not advise                    
          petitioner on the day-to-day operations or economics of a yacht             
          chartering business.                                                        
               Ballard Marine obtained insurance against various risks                
          associated with operating the yacht.                                        
               On January 26, 1987, the U.S. Coast Guard issued a                     
          certificate of documentation with respect to the yacht, which               
          shows that the vessel was then documented for pleasure use.                 
               In late October 1986, Ballard Marine hired Captain George              
          Newman (Newman), owner of Newman Marine Services (Newman Marine),           
          to move the yacht from Annapolis, Maryland, to the Lighthouse               
          Point Yacht Club (Lighthouse Point), Lighthouse Point, Florida.             
               In 1987, petitioner purchased land in Lighthouse Point,                
          Florida, on which he eventually built a house for his own use.              
               Ballard Marine also hired Newman to oversee both the                   
          outfitting of the yacht and its maintenance and repair while it             
          was in Florida.  Newman was not engaged in the charter business             
          in 1986 or 1987.                                                            
               On December 3, 1986, Ballard Marine moved the yacht to the             
          Boca Raton Resort and Club, which is in southern Florida, and               
          which was the site of a meeting of the Securities Industry                  

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