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Background
The facts may be summarized as follows. During 1993 and
1994, petitioner was employed full time by a logging company as
an equipment operator and mechanic. In 1993, petitioner owned
six fixed-wing light aircraft, two of which he purchased in
December 1993. In 1994, petitioner purchased an additional
aircraft. During 1993 and 1994, petitioner entered into aircraft
leasing agreements with Friendly Air Service, Inc. or other fixed
base flight schools (collectively Friendly Air) in the Eugene,
Oregon, area.
Under the lease agreements, Friendly Air leased the aircraft
from petitioner. Friendly Air would in turn use the aircraft for
flight instructions or rent them to other pilots at hourly rates.
Petitioner does not have a commercial pilot’s license and cannot
give flight instructions or transport paying passengers. The
leases were for 1 year but could be canceled with a 30-day
written notice. Friendly Air scheduled all flights and was
responsible for routine cleaning, maintenance, and fueling of the
aircraft. Petitioner received $34 per hour of flying time.
Petitioner was responsible for the payment of all fuel,
maintenance, repair costs, and premiums for commercial insurance.
Friendly Air maintained financial records for the leasing of the
aircraft. Petitioner did not keep any contemporaneous logs or
records of the aircraft activities. The parties, however, agree
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Last modified: May 25, 2011