- 3 -
percent of charter revenues. The agreement further provides that
petitioners (1) are required to maintain the yacht in good
condition and (2) have the right to operate the yacht for
personal use, provided such use does not conflict with the
yacht's charters.
At the end of October 1993, petitioners removed the yacht
from the water and placed it in storage for the winter at Benton
Harbor, Michigan. From September 11 through December 20, 1993,
petitioners worked on the yacht for a total of approximately 53
hours. Most of this time was spent traveling to the storage
facility where they cleaned and winterized the yacht. The yacht
was not chartered in 1993.
On April 23, 1994, petitioners sailed the yacht to Michigan
City. During 1994, the yacht was chartered 45 days, and
petitioners received gross receipts of $5,152. Petitioners
occasionally used the yacht for personal enjoyment. On October
22, 1994, petitioners removed the yacht from the water and placed
it in storage for the winter. During 1994, petitioners worked on
the yacht for a total of 194 hours, but only 89 hours of such
work was performed while the yacht was docked at Michigan City.
Petitioners spent most of this time performing routine
inspections and maintenance of the yacht. From 1993 through 1996
petitioners did not make a profit from their chartering activity.
On their returns, petitioners claimed net losses of $21,858 for
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Last modified: May 25, 2011