Hans H. and Cheryl E. Hammann - Page 19

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          activity.  Hans Hammann obviously derived a great deal of                   
          personal pleasure from sailing as evidenced by his desire to                
          involve his son in the activity shortly after the child's birth.            
               It is also obvious, based upon the types of expenses                   
          reported on the Schedules C, that sailing can be a financial                
          burden.  With the exceptions of a de minimis amount for                     
          advertising in 1984, and marginal fuel costs, the expenses                  
          incurred by petitioners in connection with the ownership and use            
          of the Malaguena would have been incurred regardless of the                 
          operation of the charter boat service.  Most likely Hans Hammann            
          was aware of the fixed costs that would be involved in owning,              
          maintaining, and sailing a boat such as the Malaguena.  Given               
          petitioners' financial status at the time the sailboat was                  
          acquired, he no doubt realized that he would have to offer the              
          charter boat services in an attempt to subsidize such costs.                
          Because of the demands of his employment with the union, Hans               
          Hammann could only devote limited periods of time to the charter            
          boat service.  Considering such time limitations against Hans               
          Hammann's practice not to offer the Malaguena for charter unless            
          he was present on the boat, it would appear to be impossible for            
          the charter boat service to be a profitable operation during the            
          relevant years.  We conclude that the Malaguena was acquired by             
          petitioners for recreational purposes, albeit with the intent to            
          offset some of the costs of ownership through the charter boat              






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