Richard J. and Carol C. Spera - Page 16

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          the Ashland Building's third floor living quarters from August              
          1996 to date.  This fact is relevant to the extent it sheds light           
          on petitioners' intent to use the Ashland Building as a personal            
          residence during the years in issue.  Therefore, we find that the           
          nature of the improvements indicates that the Ashland Building              
          was built, in part, for petitioners' personal benefit.6  Cf.                
          Weigel v. Commissioner, T.C. Memo. 1996-485 (improvements made to           
          obtain necessary rezoning for business).                                    
               Second, the record is replete with evidence that                       
          corporations other than GRC utilized the Ashland Building as                
          their principal place of business during the years in issue, and            
          petitioners have failed to show that they were not benefited                
          directly from this use.  Documents generated by Huntersfield show           
          its principal place of business as the Ashland Building.  For               
          example, Huntersfield issued invoices to Hi-Tek Chemical Corp.7             
          (Hi-Tek) in late 1988 and early 1989 showing accounts receivables           
          of $7,004, $860, $250, $660, $431, and $323 for work done on "the           
          farm".  The invoices identify both Huntersfield's and Hi-Tek's              
          address as Rd 1, Box 70, Prattsville, NY 12468, the Ashland                 

               6 We recognize that part of the Ashland Building is suitable           
          for industrial usage.  However, we have no basis for apportioning           
          the construction expenditures.                                              
               7 Hi-Tek, incorporated on Jan. 28, 1980, is the manufacturer           
          of an antifouling coating system used in conjunction with marine            
          and fresh water fouling problems.  Mr. Spera was originally its             
          sole shareholder; since 1990, he and Joseph M. Wentzell are each            
          50-percent shareholders in Hi-Tek.                                          




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