Edwin A. Helwig - Page 19

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               The record consists of only two exhibits that pertain to                
          these adjustments.  One exhibit, a security agreement, reveals               
          that during 1989, a used 1985 Carver boat was purchased, and                 
          $200,250 of the purchase price was financed.  Attached to the                
          agreement is an amortization schedule showing a breakdown of the             
          principal and interest to be paid.  The other exhibit is a                   
          December 1, 1994, memorandum from petitioner’s accountant’s                  
          office to respondent’s agent.  The memorandum contains summarized            
          information provided by the accountant pursuant to the request of            
          respondent’s agent.  The memorandum contains the following                   
          pertinent statements about the yacht:                                        
               7) Business purpose and expenses of Yacht - Per Ed                      
               Helwig, the boat (yacht is a misnomer as the vessel is                  
               42 foot trailer-able boat) is used to entertain                         
               customers.  As the boat is not docked in a slip, but is                 
               parked at his house, there are no monthly expenses                      
               related to maintenance.                                                 
                    *      *      *      *      *      *      *                        
               Pursuant to Sec. 274 the boat is not depreciated for                    
               federal income tax purposes.  Any expenses related to                   
               the entertainment of customers on the boat are out-of-                  
               pocket costs reimbursed to E.A. Helwig by the                           
               corporation or corporate credit card charges, both of                   
               which are charged to the meals and entertainment                        
               accounts and limited to 80% deductible.  A “schedule of                 
               use” is not available.                                                  
               Based on the above, respondent contends that no deduction is            
          allowable for any expenditure paid with respect to an                        
          entertainment facility after December 31, 1978, pursuant to                  

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