Charles A. Ballard - Page 15

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          realistic it was to expect Ballard Marine to earn such revenue.             
          Ballard Marine hired Schintzius, a yacht broker, who advised on             
          the operating characteristics of the yacht, its acceptability as            
          a charter boat, and its residual value.  Schintzius, however, did           
          not advise petitioner on the day-to-day operations or economics             
          of a yacht chartering business.  Before organizing Ballard                  
          Marine, from late 1985 to 1986, petitioner visited numerous boat            
          shows.  At those boat shows, vendors described yacht investment             
          plans.  We do not doubt that, before forming Ballard Marine,                
          petitioner considered that he might reduce, or even recoup, his             
          cost in purchasing a yacht by holding it out for charter.  He               
          knew that there was at least some market for yacht charters.                
          Indeed, he had arranged entertainment for clients of the firm on            
          chartered yachts.  We are unconvinced, however, that petitioner’s           
          objective in causing Ballard Marine to purchase and operate the             
          yacht was to earn a profit.  Did petitioner contemplate the                 
          possibility of earning a profit?  Yes, we believe that he did, at           
          least in the sense that a profit was possible if (and that is a             
          big if) the value of the yacht would decrease at a rate lower               
          than the rate at which its cost could be recouped out of charter            
          revenues.  Although petitioner may have been an expert in certain           
          aspects of commercial transactions that accomplished just that,             
          the insight at the core of both those commercial transactions and           
          petitioner’s hopes with regard to the yacht seems to us quite               
          commonplace.  We do not equate an objective to make a profit with           

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