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made a deposit of $85,000 on the purchase of the Bertram yacht by
using a check drawn on their Indian Head personal checking
account. The bill of sale for the Bertram yacht indicated that
the buyer was "SHIRLEY A. OLBRES, Trustee, Under a Trust Agree-
ment Dated: October 19, 1988, for the Benefit of: The H.N.
Nautical Trust (Tamara C. Olbres, Tyler M. Olbres, Jason A.
Olbres)". On October 26, 1988, Ms. Olbres withdrew $120,000 from
the 1988 Indian Head business savings account and purchased a
treasurer's check in the amount of $145,325, payable to Norwood
Marine, for a further downpayment on the Bertram yacht. In
addition, two receipts from Norwood Marine indicated that two
checks in the amounts of $535,383 and $3,500 were received from
Security Marine Creditcorp, which provided financing to petition-
ers for the purchase of the Bertram yacht.
Petitioners' Returns
Petitioners filed returns for 1986, 1987, and 1988 that they
signed and that Mr. Dennett signed as return preparer. In
petitioners' Schedules C for those years, petitioners reported
gross receipts and net profits of Design Consultants, as follows:
Year Gross Receipts Net Profits
1986 $740,990 $75,784
1987 1,235,069 83,502
1988 340,675 26,061
On line four of Schedule C of petitioners' 1988 return (1988
Schedule C), petitioners reported $49,525 of "Other income",
which was compensation that White Star paid to Mr. Olbres during
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