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In my mind, it is inconceivable to make any money
at tournament fishing * * *. This is strictly a sport.
If a guy only fished one or two tournaments in a year
and he won one of them, then he might end up in the
black for that year * * *. If you fish them a lot,
though, it is really tough.
From 1983 through 1989, Renegade was used primarily for sport
fishing. The yacht spent several months each year in and around
Cozumel, Mexico; several months each year in and around Cape Cod,
Massachusetts; and several months in and around The Bahamas.
Billfish received what was denominated as “management fees”
from various entities in which petitioner held an ownership
interest. During 1988, those entities made payments to Billfish
totaling $220,000. Billfish, however, did not perform any
management services for the entities controlled by petitioner,
and the fees were mischaracterized on the tax returns filed by
those entities. Billfish reported the following gross income,
expenses, and income or loss on its Federal income tax returns
for the years indicated:
Year Gross Income Expenses Income(Loss)
1982 $79,500 $140,892 ($61,391)
1983 327,808 573,754 (245,946)
1984 619,504 552,010 67,494
1985 519,137 658,274 (139,137)
1986 370,385 774,665 (404,280)
1987 427,750 623,940 (196,190)
1988 338,103 547,405 (209,302)
In 1984, petitioner incorporated Texas Terrors Fishing Team,
Inc. (Texas Terrors), which was owned 100 percent by petitioner
and had elected S corporation status. Petitioner and Texas
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