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petitioners were not involved with any aspect of qualifying
charterers or establishing such charters. Moreover, petitioners
reserved no right to reserve Moonshadow for nonbusiness private
use and agreed to pay AYC a reduced commission if they leased it
for their personal use. Under Washington State law, petitioners’
contract with AYC constituted a lease agreement. See Wash. Rev.
Code Ann. sec. 62A.A2-103(1)(j) and (k) (West 2003). Therefore,
AYC’s exclusive right to lease Moonshadow for a 1-year period
constitutes the average rental period for purposes of section
1.469-1(e)(3)(iii), Income Tax Regs. See Hairston v.
Commissioner, T.C. Memo. 2000-386 (holding that an arrangement
where taxpayers leased equipment to their corporation, which was
engaged in the business of leasing such equipment to third
parties, for an indefinite term over a number of years was one
period of customer use for each taxable year); Kelly v.
Commissioner, T.C. Memo. 2000-32 (holding that an arrangement
where taxpayer leased his aircraft for 1-year periods to a
company that would in turn use the aircraft or rent it to other
pilots was a yearly-basis rental); Frank v. Commissioner, T.C.
Memo. 1996-177 (holding that the flight training schools were the
lessees where taxpayer leased his plane to flight training
schools that rented the plane to customers). Accordingly, the 7-
day and 30-day exceptions under section 1.469-1T(e)(3)(ii)(A) and
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Last modified: May 25, 2011