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issue, petitioners exclusively leased Moonshadow to AYC for 1-
year periods, and AYC then chartered Moonshadow to third parties.
Under the contract, petitioners were obligated to ensure that
Moonshadow was charter ready at the start of the charter season.
As such, petitioners performed cleaning, maintenance, and
repairs. During the charter season, only AYC was responsible for
the day-to-day maintenance and operation of Moonshadow. Although
petitioners were not otherwise obligated to provide services
during the charter season, they did perform routine maintenance,
repairs, and cleaning in addition to the same services provided
by AYC. During the postseason, petitioners themselves attempted
to correct any problems noted in the postseason report. On at
least one occasion, petitioners performed a major repair to their
sailboat when they replaced the windlass.
All of petitioners’ personal services, however, were
provided in connection with the use of their sailboat by AYC and
AYC’s third-party charterers, and such use of petitioners’
sailboat was not incidental to the personal services provided by
petitioners. Indeed, the personal services provided by
petitioners were performed in their capacity as owners of
Moonshadow with the objective of preserving their investment in
the sailboat. Although prospective charterers may have selected
Moonshadow because of its pristine condition, a charterer’s
objective is to rent a well-maintained sailboat rather than to
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Last modified: May 25, 2011