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generating cash-flow over and above expenses. Petitioner used
profits from the sale of the Cape Cod property to purchase the
timeshares.
B'Mae's was a resort hotel with approximately 24-30 total
units, half of which were single rooms and half of which were
suites. B'Mae's owned and rented out the single rooms itself,
and offered the suites for sale as condominiums or timeshares.
Petitioner had an agreement with B'Mae's whereby B'Mae's would
manage the rental of the timeshares, including promotional
advertising, rental contracts, housekeeping, replenishment of
inventory, and guest registration, for a fee of 40 percent of
rents paid. This was the standard agreement that B'Mae's had
offered to other condominium owners for renting the suites.
B'Mae's exclusively handled the rental of the timeshares.
Petitioner did make people aware that he had the timeshares for
rent, but no actual rentals occurred based on those efforts.
Petitioner visited the timeshares approximately once a year
from 1988 to 1992. He stayed at one of the timeshares during his
visits, usually for 2 nights and usually in the off-season. He
did not use the pool or the lake when he visited the timeshares,
although he would eat dinner and Sunday brunch at the resort
facility. He once brought his daughter along and once brought
his son. Petitioners did not take any depreciation on the
timeshares. In preparing to buy the timeshares from B'Mae's,
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