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service business operated out of Kansas City. Dwight and Perry
also used the plane for travel related to their positions as
directors of other businesses (director’s flights), for other
business and charitable purposes (nonvacation flights), and for
vacation travel (vacation flights). In 1992, the plane was used
approximately 30 percent for charter business, 23 percent for
director’s flights, 18 percent for nonvacation flights, 24
percent for vacation flights, and 5 percent for other purposes.
In 1993, the plane was used approximately 16 percent of the time
for charter business, 16 percent for director’s flights, 32
percent for nonvacation flights, 24 percent for vacation flights,
and 11 percent for other purposes.
Use of the aircraft for director’s flights, nonvacation
flights, and vacation flights was reported by Dwight and Perry as
compensation in connection with their employment with petitioner.
Petitioner calculated and reported the amount of imputed income
for Dwight and Perry in accord with the valuation formula
provided in section 1.61-21(g), Income Tax Regs. Petitioner, in
accord with section 162, deducted its costs incurred in operating
the aircraft, including those flights taken for director’s
flights, nonvacation flights, and vacation flights. Respondent
agrees that petitioner correctly applied and calculated the
imputed income and associated deduction figures pursuant to
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