- 7 -
yacht concluded that it was 95 percent complete, and the vessel
was issued a certificate of inspection by the U.S. Coast Guard,
subject to the correction of certain minor deficiencies. The
vessel was assigned identification No. D1026508 and named the Sir
Winston.
Petitioner caused WDI to pay for the installation of
mirrors, doorframes, carpeting, and other fixtures on the Sir
Winston, and two individuals on the WDI payroll did finishing
work on the Sir Winston interiors. Petitioner also replaced a
defective steering mechanism that had been installed by Darling
Yachts, Inc.6
During the 1-year period after petitioner took possession of
the Sir Winston (December 6, 1994 to December 6, 1995),
petitioner had four checking accounts. During this period, the
checks drawn on those accounts that could have been for capital
improvements to the Sir Winston did not exceed $195,799. During
this period, petitioner also had two credit cards through which
he made expenditures totaling $29,917.
In April 1996, petitioner sold the Sir Winston to Dream USA,
Inc., for $1,250,000. Petitioner advised his return preparer,
and reported on his 1996 return, that his basis in the Sir
6 The failure of Darling Yachts, Inc., to complete the
vessel satisfactorily, or to deliver it on time, prompted
litigation between petitioner and Darling Yachts, Inc., discussed
infra.
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