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Petitioner originates and services commercial, consumer, and
residential loans throughout the country.
Midland Aviation Co. (Aviation) was a subsidiary of
petitioner and filed consolidated Federal income tax returns with
petitioner. On April 20, 1995, Aviation was liquidated and a
Falcon 200 aircraft (the Falcon) owned by Aviation was
transferred to petitioner. During the years in issue, petitioner
used the Falcon predominantly for business travel, but it was
occasionally used for personal travel by George and Jeff Records
(the Recordses), two corporate officers of petitioner.
Petitioner kept accurate records that indicate the nature of the
flights of the Falcon.2
The personal use of the Falcon was treated as compensation
to the Recordses. On the basis of the valuation rules set forth
in section 1.61-21(g), Income Tax Regs., petitioner properly
determined that the value of the personal use to the Recordses
was $48,424, $45,076.57, and $14,916, respectively, for the
taxable years ending July 31, 1995, July 31, 1996, and the short
taxable year ending December 31, 1996. Petitioner reported these
2On the basis of an allocation according to flight miles,
the percentages attributable to business use and personal use
during the years in issue were as follows:
TYE Business Personal
July 31, 1995 80% 20%
July 31, 1996 69 31
Dec. 31, 1996 68 32
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