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(B), Temporary Income Tax Regs., 53 Fed. Reg. 5702 (Feb. 25,
1988), do not apply in the instant case.
We now turn to the extraordinary services exception under
section 1.469-1T(e)(3)(ii)(C), Temporary Income Tax Regs., 53
Fed. Reg. 5702 (Feb. 25, 1988). Respondent asserts that
petitioners did not provide extraordinary personal services in
their sailboat charter business. Petitioners, however, contend
that they provided extraordinary personal services by, for
example, updating Moonshadow’s web page on AYC’s internet site,
searching for and acquiring proper repair parts, performing
installations, repairs (e.g., repair of windlass) and routine
maintenance, and using an outstanding full-service charter broker
to facilitate the check-in and embarkation process. Petitioners
argue that performing extensive work on Moonshadow to keep it in
pristine condition constitutes exceptional personal services.
The personal services provided by petitioners in conjunction
with AYC’s services clearly contributed to maintaining
Moonshadow’s immaculate condition and to its marketability to
prospective charterers. Such services, however, are not those
ordinarily contemplated under the extraordinary personal services
exception. In other words, for that exception to be applicable,
the use by customers of the sailboat would have to be incidental
to the receipt of petitioners’ personal services.
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