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maintenance, refinish the interior, wax the sailboat, and switch
the pumps. During the preseason, petitioners would conduct a
maintenance check, which AYC would verify based on a preseason
readiness checklist. Petitioners also rented a storage locker in
the marina building where they stored proprietary parts that AYC
or petitioners could use for repairs on Moonshadow.
To document their work, petitioners maintained
contemporaneous handwritten logs identifying the dates that they
worked on Moonshadow and the type of work completed. The work
logs indicate a timeframe for each day Mr. White or petitioners
together worked on Moonshadow. The work logs, however, do not
detail the amount of time actually spent on a specific task, do
not indicate which petitioner performed a particular task, and do
not account for lunch breaks that petitioners testified they took
during the day.
Petitioners timely filed a Form 1040, U.S. Individual Income
Tax Return, for each of the years in issue. Petitioners attached
to each return, inter alia, a Schedule C, Profit or Loss From
Business (Sole Proprietorship). On each Schedule C, petitioners
identified their business name as GW Rentals and their principal
business or profession as boat charters and tours. On the
Schedules C, petitioners marked “Yes” on Line G: “Did you
‘materially participate’ in the operation of this business”.
Petitioners reported losses from GW Rentals on the Schedules C as
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Last modified: May 25, 2011