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prospective tenants, received rental applications, collected rent
checks from tenants, and issued receipts for rental payments.
The managers forwarded rental applications and rent checks to
Mrs. Jahina, who made all the decisions relative thereto.
In 1996, the rental properties generated approximately
$767,000 in earnings before depreciation and amortization of
$128,000. In 1997, the rental properties generated approximately
$811,000 before depreciation and amortization of $153,000. These
earnings represented gross profit margins of 17 percent and 19
percent, respectively, for 1996 and 1997. Mrs. Jahina credited
her hands-on management for the financial results. She described
the rental property activity as a “healthy” and “well run”
business. In mid-2000, Mrs. Jahina resigned her outside
employment and thereafter devoted herself to the full-time
management of the subject rental properties.
During the years at issue, Mrs. Jahina maintained a desk
calendar. On the calendar she noted her activities with respect
to the rental properties. She kept the calendar “because the
regulations asked me to.” On the calendar, Mrs. Jahina did not
go into great detail about her activities. However, her
notations generally suggest what she did and how much time she
spent with respect to the rental properties daily or weekly. She
also maintained telephone records for the periods in question,
which indicate telephone calls made and received with regularity
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Last modified: May 25, 2011