Lucian T. Baldwin, III - Page 50

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          Nevertheless, in 1993, petitioner’s accountant represented to               
          respondent that BAC operated as a charter service, and BAC made             
          similar representations concerning the nature of its business on            
          its tax returns.                                                            
               Although BAC maintained extensive accounting records as well           
          as separate books of account and a separate checking account, BAC           
          did not consistently generate invoices to petitioner’s other                
          companies until May 1989.  After November 1990, BAC did not                 
          include passenger names other than petitioner’s in the aircraft             
          utilization reports and trip recaps maintained by BAC.  BAC did             
          not maintain any records regarding the nature of the trips taken            
          on its aircraft; BAC simply contends that each trip was a                   
          business trip because BAC charged a fee for everyone who used its           
               The record contains no credible evidence indicating that BAC           
          ever developed a business plan or that it engaged in any market             
          analysis before setting its per-passenger rates.  Although BAC              
          increased its per-passenger rates three times during the years at           
          issue, the rate increases were implemented without any market               
          studies in an effort “to successfully withstand any level of IRS            
          scrutiny”.  BAC did not take any additional steps to increase its           
          income or reduce its expenses despite advice from both                      
          petitioner’s accountant and David Stubbs, BAC’s pilot and                   

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