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other companies each time the Sabre was used. From 1989 through
and including 1992, BAC billed one of petitioner’s companies for
each person transported, using a per capita rate established by
BAC’s president after consultation with petitioner.9 The per
capita rate used to prepare the invoices was increased in 1989,
1990, and 1991 in an effort to reduce BAC’s substantial operating
losses.
BAC claimed depreciation on the Sabre, which was titled in
BAC’s name, and on a Cessna, which was not titled in BAC’s
name.10 Petitioner acquired the Cessna ostensibly so that he
could obtain his pilot’s license and eventually fly the Sabre.
During the years at issue, BAC did not offer the Sabre for
charter by third parties, nor did it lease the Sabre to a third
party; BAC used the Sabre to provide transportation exclusively
to petitioners, their family, and invited guests.
9After November 1990, BAC did not include passenger names
other than petitioner’s in the aircraft utilization reports and
trip recaps maintained by BAC. In addition, BAC did not maintain
any records regarding the nature of the trips taken on its
aircraft.
10Record title to the Cessna was apparently held by a
separate corporation, Lucian Aircraft Co., which insured the
Cessna until 1991. Petitioner’s accountant testified that BAC
claimed depreciation on the Cessna because BAC should have owned
the Cessna. Certain records in evidence show that the Cessna was
rented on three occasions during 1990 by people who were or had
been employed as BAC’s pilots.
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