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purpose, or 11 percent of its total 1988 use. In addition, the
airplane was flown for crew training, maintenance, repair, and
testing purposes. This use amounted to 33.45 hours in 1988 and
9.60 hours in 1989, representing 30 percent and 14 percent of the
total use, respectively. Finally, petitioner used the airplane
wholly or partially for personal reasons on five occasions during
the years at issue. Petitioner used the airplane for 2.9 hours
in 1988 and 6.4 hours in 1989, or 3 percent and 9 percent of the
total time, respectively.
When the airplane was used to provide management services,
airplane service fees incurred for such travel were billed
separately from the management fees. In these situations, the
airplane pilot would prepare the airplane service bill, and
Investments’ accounting department would process the bill and
separately charge the customer involved. For the years at issue,
the airplane rental fees charged the other entities were $700 per
hour, plus out-of-pocket expenses of Investments’ employees for
meals, entertainment, and lodging. The airplane pilot set the
$700 hourly airplane rental fee, based on the anticipated
expenses associated with 200 hours of billable flight time. That
estimated hourly fee was low for 1988 and 1989, but the estimated
fee was subsequently adjusted upward.
When petitioner used the airplane for personal use, he was
billed for and paid the direct costs of the flights; these direct
costs included, for example, fuel, hangar storage, tie-down,
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