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not incurred in a trade or business. Respondent also removed the
gross receipts received by Mr. Ciaravella and reported by him on
the Innovative Schedules C and recharacterized and included them
as constructive dividends.
Although most deposits into Innovative's checking account
were made by Dolphin, there were some deposits from
other sources. In August 1992, R.C.I., of Naples, Florida, paid
$1,700 for race car parts purchased from Mr. Ciaravella. In
November 1993, the Model Search of Florida paid $2,065.50 to
Mr. Ciaravella as compensation for the use of the race car as a
prop in a movie production. In June and July 1993, Mark Pritch,
another race car driver, paid $35,000 for the rental of
Mr. Ciaravella's trailer and truck and other equipment.
Dolphin also arranged to place its logo on power boats
engaged in racing events sponsored by charities. The boating
events averaged 10 races a year, at locations all across the
country. These races also attracted upscale crowds. In exchange
for being allowed to display its logo, Dolphin provided jet fuel
to the boat owners when they were in the greater Sarasota area,
including St. Petersburg and Tampa. Mr. Ciaravella deducted the
cost of the boat fuel provided by Dolphin on his Innovative
Schedules C for his 1992 and 1993 returns.
Mr. Ciaravella's 1993 return was prepared by a Mr. Buchman,
who is an employee of I D S Tax and Business Services. His 1992
return was not signed by a paid preparer. Vivian Wright,
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