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truck, a fuel farm, tools, office equipment, parts, fuel, and
oil. PFC’s principal business activities from the time of its
inception have been flight training, aircraft rental, charter
services, and aircraft sales. PFC’s principal place of business
is at the Beaver County Airport.
During the years in issue, petitioner owned 90 percent of
the shares of PFC, while Fred A. Neppach owned the remaining 10
percent. During this time, petitioner participated in PFC on a
full-time basis as a manager, flight instructor, and mechanic,
while also holding the corporate offices of president, treasurer,
and assistant secretary. Mr. Neppach served as PFC’s general
manager, vice president, and secretary. Mr. Neppach, who had
received his interest in PFC in exchange for future services,
never contributed capital to PFC, and in 2000 he transferred all
of his shares to petitioner for no consideration.
Beginning in 1997, petitioner began acquiring additional
equipment which he determined was necessary in order to continue
the operation of PFC. Petitioner decided to purchase the
equipment himself and lease it to PFC because petitioner felt
that the company could not have afforded to make the purchases,
and because if petitioner had “let the company buy the equipment,
he [Mr. Neppach] would automatically have 10 percent of the
equipment”. Petitioner felt this was undesirable because Mr.
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Last modified: May 25, 2011