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J-27 sailboat) which were used solely for recreation and
maintained near petitioners’ residence. The Diane, because of
its vast size, was maintained in a professional yard in
Jamestown, Rhode Island, a 5-hour drive from petitioners’
residence. The Diane was also stored out of the water on dry
dock.
After joining the Association, knowing of the sponsors, and
purchasing the Diane, in August 1991, petitioners incorporated
Diane Racing. Mrs. Schwartz was the sole shareholder of Diane
Racing. Diane Racing was incorporated as an S corporation.
Petitioners had experience in business from their rental
real estate business (Schwartz Realty) in Washington, D.C. Mrs.
Schwartz did the paperwork for Diane Racing, such as paying the
bills, maintaining an annual ledger and other financial records
(e.g., keeping the canceled checks of expenses paid), maintaining
correspondence, sending out promotional mailings, making boat
arrangements (e.g., transporting the boat), and creating and
maintaining a Web site for Diane Racing. Petitioners spent an
average of 15 to 20 hours per week on Diane Racing.
Petitioners’ son Benjamin was named president of Diane
Racing. Having Benjamin as president allowed Diane Racing to
qualify for lower insurance rates because Benjamin had a
captain’s license and was capable of repairing the Diane’s
engine. Additionally, through petitioners’ and Benjamin’s
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